Stockcharts.com Weekly Review

May as well try and get a review post up before Monday's open. Feeling very sleepy... 2 hrs sleep on a red-eye is not good for the soul.

Dr. Joe raises the issue of "Agflation". Interesting thought - but I think commodities have peaked for this stage of the bull cycle, although the best may yet be to come.


Joe is looking at a potential breakout for oil companies - but commodity-based stocks tend to lead commodity prices, so if they fail to break it would be bad news for oil:


Not marked, but there is a 'sell' trigger in the Dow's PPO:


Maurice Walker has jumped up the league table - his weekly review is worth the price of entry. Maurice looking for a breather in the markets, his closing paragraph pretty much echoes what I think will play out. Follow his link to get his charts:

There was contest held a while back called the wacky warning label contest. Second prize in the competition went to a certain warning that was written on a kitchen knife that said 'never try and catch a falling knife.' Have you ever tried to catch a falling knife? It is very dangerous for obvious reasons. Sometimes as traders, we try and take positions when prices are falling, we refer to this as buying the dips. In the early stages of a trend this is a profitable strategy , but new money entering a long position at these levels does present a higher risk. The point is, that if we don't heed the message that the market is sending and chose to ignore obvious warning signs, we may end up with a nasty cut.

We've made a lot of money since the March lows and now is the time to pare down long position sizes and tighten stops, until a directional move has clearly been decided. A defensive posture is best, if wave A is concluding and wave B is forming. If strength is revealed here, then those of us who are swing trading, by playing the weakness on the intraday charts, will be forced to cover and take new long positions. I'm not saying that the advance has concluded, but since the breakout of the intermediate trendlines, we have run into a massive amount of resistance.

The stock market is in a bit of a quandary, being in a most awkward predicament after the breakout of the intermediate trendlines. The intraday charts have produced some very bearish signals, while the daily indices still have some technical support. The rising trendlines on the DJIA and the S&P 500 60-minute charts were tested and slightly violated on Friday. But the violation was not a decisive breach. Therefore, we find ourselves at a crucial level of support resting right on the 20-day EMA. If the S&P 500 breaks down further, it will not only break rising support, but it will also violate the recent minor low at 1383.

Prices have already broken below the intermediate downward trendline and horizontal support at 1396. If 1383 is violated, prices will run into more support at the 50-day EMA, and likely test the lower support of the recent handle formation near 1369. Should the 1369 support not hold up, then the last significant minor low at 1324 comes in play.

Last week the daily charts broke down as the MACD tipped lower producing a bearish cross, and the stochastic rolled over and is now hovering near the value of 50. If both indicators continue to breakdown, prices may resemble a falling knife. However, if buyers were to show some conviction at these levels, then the S&P 500 might get a third touch to its minor trendline, which would allow it to be reclassified as intermediate trendline. But with the S&P 500 having already tagged its 50 % fibonacci retracement from its October high, and the 200-day SMA looming above our current prices, the deck is stacked against the rally continuing. In addition to that, the S&P is running into overhead resistance from the December lows on its weekly chart.

During the course of the week, 10-minute traders of the SPY got some excellent signals that prices were breaking down. On Tuesday prices put in a second top at 142. The following day a head and shoulders top appeared, having broken down and backtested during the same session. Prices sifted lower breaking the double bottom confirmation line at 1397. That also allowed the rising wedge on the SPY 60-minute chart to breakdown. An attempted recovery occurred on the SPY 10-minute chart, as prices pulled back above the confirmation line, but resistance was found at the 50-period EMA. This marked another lower high that evolved into a descending triangle (1st chart down). On Friday prices gapped lower breaking the below the descending triangle, which has now become resistance. The SPY 10-minute chart continues to get lower highs and lower lows.

I've drawn some speculative Elliott wave counts on the SPY and QQQQ 60-minute charts, which shows that wave 5 was a truncated fifth (5th and 6 th chart below). Meaning that it failed to rise above wave 3 producing a double top formation. If my speculative count is correct, then we could be witness an abc move. The SPY already broke down from its descending triangle, but the Qs just formed one on the 60-minute chart. On a smaller scale of the Qs 10-minute chart you can even see that a small pennant has been carved out. Pennants usually are continuation patterns of the current trend, which happens to be down right now in that timeframe. These counts should not be treated as anything more than speculation on my part, because I have found that Elliott wave counts often need revision.

We have had a huge percentage run up since the March lows, and are over due for a corrective move. If the current rising trendlines break on the index daily charts, I believe that we will fall to test the 1324 minor low on the S&P 500. But I do think prices will stabilize near the 1340-45 area, which is the 50 % Fibonacci retracement off the March low (9th chart below). All I'm saying, is that if buyers don't step up to plate here soon, I would count on a short term corrective phase to transpire.

The VIX, which is the gage of fear, has a bullish falling wedge and apparently broke out on Friday (3rd chart below). I believe that prices will break down and cause the VIX to rise back up to its broke 2007 trendline in the form of a backest. If this occurs it will drive the market down. I remain long-term bullish but am short-term bearish (cautious). The inverse complex head and shoulders pattern on the S&P 500 has a minimum target of 1536. The same pattern on the Nasdaq has a target of 2683. Both price objectives would take us back to the December highs. thechartpatterntrader.com

Ted Burge's charts show tight resistance and support, nothing which makes decision making easy. Moving averages perhaps best guide.

His Qs point-n-figure chart is bearish:


Yong Pan has the S&P at Fib resistance:


Weekly chart at bearish resistance:


Richard Lehman on relief rally mode:

5/11 -- The major indexes for both large and small caps continued in downward minichannels Friday, but all held within their larger still-upward trending ST channels. The Dow and Naz actually touched support and held so far. Meanwhile VIX didn't even move, so the ST trend is still up -- at least for the moment. The longer term action is still heading higher in minis that actually broke LT declining trend lines, though they all have reversed since -- but that may just mean they are they are retesting the breakout. So despite fundamentals that will not get better for a while, the market is still in a 'relief rally'

5/9 -am- Dow and RUT have just about hit their lower green uptrend lines. Others still have some downside. Even the techs and other strong points are coming down to the lower part of uptrends. The big question will be if those green uptrend lines hold.

5/8 -- Its getting to be a bit of a mixed bag right now. The Dow and SPX lean toward being in ST downchannels, but the small caps aren't quite on the same page. Oil and gold continue up and VIX continues down.Best to see what happens in the next day or so.

5/7 -- Today's turn not only took away any new mini uptrend scenario for the short term, many indexes came down through the channels and broke them to the downside. The short term uptrends from mid-April are now suspect and perhaps even history. Long terms are all intact -- and isn't it interesting where the SPX came to and turned on the daily chart (my line at 1425 - not 1400 as everyone expected). This break will likely carry the short terms lower, though new channels or minis cannot be drawn yet.

Finally (and back to oil), Jack Chan has the Energy Select Sector SPDR (XLE) in rally mode and has ignored the April MACD 'sell' trigger:

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Running a little late on everything this weekend. The MSFT-YHOO fun and games may have some dampening influence on proceedings for Monday, but how went the week?

Dr. Joe is watching daily machinations:


Although the dollar is attempting a run of strength (which will hurt gold prices); oil looks to have found a point of strength:


He has called a breakout in the Dow:


Ted Burge is watching the Q's. A positive test of support?


The point-n-figure chart is looking for $53.59 off the May 1st Ascending Triple Top Breakout:

Maurice Walker has called an end to the correction. His fan chart shows it nicely:


Maurice's commentary is a(nother) good one, although I disagree with him on the market not closing in bear market territory; in January of this year breadth indicators reached levels comparable to Sept 11th and the Asian Currency Crisis. We may have got strong bull markets from them, but the action which led to these lows was certainly bearish. However, what he says fits well with what Richard Lehman suggests:

The Correction Is Over

In 58 BC Julius Ceasar started his conquest of Gaul. It took 7 years for Ceasar to conquer Gaul and it was only due to his strategical talents the campaign was so short. After this campaign, Ceasar decided to stay in Gaul with his army until he would be chosen as the new consul. His political opponents wanted him to get back to Rome and be prosecuted for the things he had done when he was a consul. Ceasar had made a decision, which resulted in the fall of Roman republic. He lead his armies across the river of Rubicon and said the well-known ' Alea iacta est' and started his march towards Rome on January 10th of 49 BC. Alea iacta est is Latin for 'The die has been cast,' meaning Ceasar was throwing the dice on his invasion of Rome like a crapshoot.

The decision to cross the river of Rubicon was a risky and uncertain venture. But the fall of Roman Republic occurred because Ceasar made a decision to cross. As a result of this war, Ceasar became the conqueror of Italy. Once he crossed the river Rubicon there was no turning back the decision had been made. Ceasar made a conscious decision to conquer Rome. Ceasar's opponents were over thrown because of a decision that he made to cross a river, likewise this market has made a decision this week to cross a river and there is no turning back. As we had anticipated, the intermediate downtrends are now broken and the birth of a new intermediate upward trend has been born. The changing of the trend has propel the bulls to power. Ceasar found little in the way of resistance in his march against Rome, and so will this market. The stock market is not a playground it is a battlefield and the bears were defeated this week. The decision to break above the declining trendline caused the market to over throw its opponents allowing the bulls to conquer the correction.

Since last summer, the bears have been telling us that the economy was in a recession and that the stock market was in a bear market. Every single so-called 'expert' that told us that US was in a recession was wrong. Those that told us that the stock market was irrefutably in a bear market were also wrong. The 1Q real GDP came in with a positive number, therefore during the first three months of 2008 the economy was not in a recession. Furthermore, the stock market failed to close in bear market territory. Yes, it's true, the economy actually grew during the first quarter of 2008 at 0.6 %. The important thing about this number is that it is positive. Now grant it, the US is growing at a snails pace, and I will concede that the economy is contracting. But just because the economy is growing below trend, doesn't mean that we are in a recession. It takes two consecutive negative quarters of GDP to academically define a recession. These 'so called' experts have ignored the economic facts and have caused a lot of hysteria among the masses. I don't think we will even get a negative quarter of GDP in 2008.

The bad news bears also told us that inflation would soon be spiraling out control, and that high energy prices would spill over into core inflation bringing the economy to its knees, causing stagflation. This week the year over year Personal Consumption Expenditures (PCE) core inflation rate for March came in at just 2.1 %. Proving the bad news bears wrong again. If you still think there is an inflation problem, then go to your local tire dealer and have him check your tires, because that is the only inflation problem you could possibly be experiencing.

Because inflation is not out of control, when you have a slowing economy you have a deflationary impact on inflation, disinflationary as long as prices continue to decelerate their rate of increase, while having a positive number above zero. You don't become deflationary until your under zero, in which prices drop and stop increasing. So right now there is a disinflationary effect in the economy. Disinflation is a decrease in the rate of inflation, a slowing of the rate at which consumer and wholesale prices increase. Inflation was lower in 2007 than in 2006, not higher. Additionally, inflation is expected to further drop in 2008 and 2009.

This week the Fed slowed the pace at which they had been lowering the federal funds rate, cutting it just 25 basis points. The market originally sold off on the news, with fear that the Fed would have to start raising rates to combat inflation. Then the next day the stock market shrugged off the news and rallied. But this approach by the Fed is actually a plus for the economy, it is good news that the Fed no longer feels that it is necessary that they have to aggressively lower rates, because the turmoil in the economy has mostly been stabilized.

Even the jobs report this week showed a better than expected outlook for the economy. The unemployment rate dropped in April back to 5 %, as the US only lost 20 K jobs rather than the 75 K that was expected. A recession has never occurred with a 5% unemployment rate, because a 5 % unemployment rate is consider full employment. But don't tell that to the obsession recession crowd, they won't believe you.

The federal government has promoted fiscal activity that is running counter to economic trends, by passing the stimulus package, while the federal reserve has aggressively cut rates. These two actions should have an impact on the economy by the second half of this year. The Democrats and Republicans should be praised for passing the stimulus package during this economic slowdown.

The breakouts could find some resistance here near the 200-day simple moving average. Which could allow prices to backtest the broken trendline. Once our current wave A has concluded, we should see wave B develop. After that, I think prices will rise to chanllege the October highs in wave C. However, I dont think that will transpire until the end of 2008 or the early 2009. The DJIA and the S&P 500 both got follow-throughs on the breakouts of their intermediate downtrends with acceptable volume, but the Nasdaq closed lower. Look for a backtest of the broken trendlines next week.

During wave B, I fully expect the bears to reemerge with their recession rhetoric and bear market rally talking points. Which will present another buying oppertunity for the bulls. Trend traders can either take a long term hold approach, while swing traders can sell into the rally once wave A concludes and then look for another entry point once wave B concludes.

Lastly, the DJIA monthly chart got some positive technical last week. The monthly chart got a bullish cross of the stochastic line and a higher MACD histogram bar, changing the slope. That should allow the MACD to get a bullish cross and then ultimately get negative divergence by 2009. If this scenario were to play out, the DJIA would exceed its October high. thechartpatterntrader.com

His inverse head-and-shoulder patterns are a thing of beauty:


Richard is looking at new (strong) short term rising channels which are challenging long term downward channels.

5/3 -- Friday's blip (which was probably exacerbated by the short covering of folks who were watching the SPX pass above 1400) made the short term picture challenging, but I think its fairly clear now with the new channels I've drawn on the short term charts. The new channels encompass the moves of the past two weeks, which essentially were all mini channels. The larger channel shows a strong uptrend in the short term that is now pushing through the longer term declining lines from last year. (Except perhaps for the SPX, which I show as just now hitting its long term line from last September.) So, the picture remains up, though toppy for the major indexes.

5/2 -am- Sorry, my 5/1 post disappeared somehow. The breaks from Wednesday & Thursday turned into slope changes on the existing uptrends rather than new downtrends. A drop in gold and crude further fueled a rally back to the top of that uptrend, and now we may be reaccelerating upward as money pours back into stocks based on the S&P closing back over 1400. VIX hit the upper line on its hourly nad collapsed, remaining in its downtrend (though June and July futures expect it to turn upward by then). You have to go with this rally as extended as it is since that's where the money is going.

4/30 -- Breaks expanded today. The Dow, Naz, QQQQ, and SPX all following suit. The Dow's been right up against upper long term lines and today's touch was picture perfect! I couldn't buy the puts fast enough when the Fed announcement pushed things up to +150. Now we'll see what kind of follow through we'll get as we don't have enough data to draw new down channels yet. Remember the old Wall STreet adage 'Sell in May and go away'.

Finally, Yong Pan has taken a more cautious view on the markets:

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A week which has mostly passed me by with respect to the market. So what did happen?

Dr. Joe is looking to nest week's figures:


Dollar looks ready to make some headway north, possibly to 77-78 level:


He has given the new Stockchart's charting features a go:


But there looks to be a breakout in the Dow (Joe doubts it another chart - but it looks good to me). PPO looking strong:


Maurice Walker is now second ranked Stockchart public list; his weekly review makes it one of the best. I like his analogy for this week:

I've been following the a recent news story about John Darwin, who was a canoeist that faked his own death. He and his wife committed insurance fraud as he went into hiding in Panama. Darwin claims he had amnesia for the past five years. If he is found guilty he could face up to 10-years in prison. Darwin had been written off as dead by everyone, only to come to find that he wasn't dead after all, he was only on a short hiatus. John Darwin was alive, and so is this market. The bull market is not dead, nor is this a bear market. This bull market was only faking it's own death, perpetrating fraud against those who are short this market. Whom will ultimately pay the price for this deception.

A week ago the DJIA broke out from overhead resistance. This week both the S&P 500 and the Nasdaq followed suit, with the Nasdaq closing above 2419 on Thursday and the S&P 500 closing above 1396 on Friday(see 1st chart below). The averages are all resting right below their intermediate declining trendlines, which they need to clear in order to change the trend. The Nasdaq erased losses by the end of the day on Friday, despite a disappointing earnings report from Microsoft. The averages all declined for the first part of the session as the University of Michigan consumer sentiment reading fell to 62.6, a 26 year low. However, the market once again shrugged off bad news and moved higher. You may recall that the market has been rising on bad news, like when that terrible jobs report came in, when the housing starts hit a 17 year low recently, and even when CPI headline inflation rose to 4.0 %.

I have now re-classified all the major index daily charts as complex inverse head & shoulders patterns (1st chart below). I did so with the Dow and Nasdaq last week, and then the S&P 500 was re-classified this week. They still meet the double bottom criteria, but they possess certain technical attributes that are better suited for an inverse H & S pattern.

I was previously perplexed in doing so based on the shallow first right shoulder on the averages, which appeared to be more part of the head than a individual shoulder. But the guidelines don't require each shoulder to touch the neckline and therefore it has been properly assessed. Now that the indices have broken out of overhead resistance, they are forming handles. I expect the handles to breakout by Monday or Tuesday. Handles form on many patterns, for instance a cup with a handle.

On Friday, the average directional index (ADX) (14) crossed above the negative directional index (-DI) on the daily charts of the S&P 500 and the Dow. While the positive direction index remains above both the ADX and -DI lines. Additionally, the ADX has moved 4-steps off of its low on both averages. Signaling that a new trend to the upside is being born. The Aroon (2nd chart down)on the S&P 500, has also signaled that we are in a new up trend, as the Aroon up has a reading of 100. The Aroon oscillator is at the value of 100 as well.

There will be a lot of important economic data next week. President Bush informed us that the rebate checks will be going out as early as next week, just prior to 1Q advance Gross Domestic Product (GDP) being announced on Wednesday. If the Fed holds steady or only cuts a quarter-point it would be good for the dollar and bring oil prices down from the stratosphere. A few days ago fed fund futures were at .50 %, but have since dropped to .38 %. I think if the Fed makes some positive comments regarding the economy, implying that it isn't necessary for them to take such an aggressive stance in cutting rates, it will send a positive signal to the market. It would be interpeted as if it was the Fed's opinion, that the worst is behind us. Additionally, the effects of stimulus packages tend to work when they are used, and that should cause the 2nd and 3rd quarter GDP to significantly rise.

The Democrats and Republicans are to be praised for their joint effort in passing the stimulus package, which will be targeted to 130 million middle class families with the propensity to consume. Thus, that should help corporate earnings and the retailers.

The dollar broke out of its downtrend this week and has likely put in a bottom (pg 2). The dollar has positive divergence on its daily chart, while crude oil has negative divergence. On Friday, oil prices (pg 2)spiked on news that the US fired on a Iranian vessel. The dollar is not collapsing or is it in a free fall, the dollar has put in a bottom and now should start to gradually rise. We continue to see a rotation out of commodities and into the financials. Which allowed the financials to break their intermediate downward trend one week ago, getting a follow-through this past week. The financial weekly chart continues to be extremely bullish.

The indices weekly charts are extremely bullish at these levels, and we are poised for a rally that could last for the next 6 or 7 months. The Dow, the Transportation average, and the Nasdaq are backtesting their major trendlines on the weekly charts, (charts 5,6, & 7 below)that broke down in early January. The bears will tell us that this is a backtest, but they are wrong. Because a seismic shift has now taken place in favor of the bulls. The market tide is turning as the 13-week EMAs have changed their slope, and are now on rise. Meanwhile the MACD histogram continues to have a rising slope. Market breadth is positive according to the advance/decline line (pg 2), the VIX (pg 2, the gage of fear) broke below it's 2007 rising trendline last week, and the S&P 500 bullish percentage is on the rise.

I predict that we will breakout on Monday, and then backtest the broken trendline on Wednesday when the GDP data is released. Then from there it is up, up, and away. But if I'm wrong and we suffer a reaction here, I am confident that a breakout is imminent. thechartpatterntrader.com

The complex head-and-shoulder patterns look good:


I have been watching Ted Burge's semiconductor index. He has it at resistance:


But the upside P-n-F target is 517.5 - part of the April 21st double top breakout:


Henry Ford of the Tradesniffer.com has some interesting measured move stock plays.

Yong Pan has his summary. Sees a chance the Fed will not cut next meeting. Negative divergence between large and small caps? Relative strength for the Dow suggests chance for bear market reversal:




But double bottom projection to Nov/Dec levels:


Richard Lehman is more cautious and favors a reversal (down):

4/26 -- The short term charts are fairly strong, but the Dow has already hit its declining three-year trend line and is about to hit the one-year. Others will hit these declining lines soon as well. By the way...do you realize that the Dow has now retraced 50% of the entire decline from October? Everyone appears focused on SPX at 1400 (primarily because they think only in horizontal planes, but we know better!)... my chart says 1425 is really where upper resistance lies. Meanwhile, the golds and oils have lost their luster as people gravitate back into stocks, but I sense that will soon come to an end. I also see VIX bracing for another move back up (and the futures say so). So, its up until things break for the major stock indexes, but that break may not be far away.

4/24 -- Gold and oils are now both faltering as the equities pick up strength. Techs and financials are strong. Money is clearly moving 'back in' to the things that were low and out of the ones that have risen sharply. Weak earnings are almost irrelevant. We're toppy in the short terms but still heading up. My biggest concern is the three year lines coming down as we're pretty much there on the Dow and others. That's one to watch closely.

4/23 -- The short term action of the last 4-5 days is now rather uncommitted. The Dow and SPX turned upward, breaking a small downward mini, but a larger picture is still unclear. It leans downward, though, while the small caps, led by strength in the techies leans more upward. Bear in mind that long term resistance lies ahead from declining upper lines on the one-year charts.

4/22 -- The breaks did lead us into small downchannels, but somehow they aren't looking that negative to me...at least not yet. This could turn out to be a very mild little short term decline and take off, but we'll know that soon enough if it breaks upper lines. Otherwise, its heading lower.

Finally, Robert New has a neat NYSE wedge breakout with backtest:

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A big push on Friday looks to have given bulls an edge. How did the Stockcharter's see it?

Dr. Joe kept an eye on Oil as it continued its march ever higher.


What do stochastics say here for the Dow? Will the next backtest reset support/resistance for this indicator?


Considers the Nasdaq and S&P as contained by resistance:


The Maurice Walker homily favors further gains:

The daily DJIA got a break above its double bottom confirmation line of 12,767 on Friday. The pattern measures 1133 points having a target of 13,900. I expect the other daily index charts such as the S&P 500, the Nasdaq, and Russell 2K to follow the Dow's lead, and eventually move above their confirmation lines. Once the double bottom patterns breakout, prices will challenge the intermediate downtrends. However, the Russell 2K must break above its intermediate downtrend before it can break above the double bottom pattern. The S&P 500 rose 4.31 %, the DJIA increased 4.25 %, and the Nasdaq climbed 4.92 % for the week.

The market conditions continue to be favorable, as the market continues to rally on bad news. Two weeks ago the market held on to gains after the worst jobs report since 2003. This past week more bad news occurred as housing starts hit a 17-year low, the consumer price index rose by 0.3 %, taking headline inflation to 4.0 %, and Citibank reported a 5.1 billion dollar loss for the first quarter and a 12 billion dollar write down. Meanwhile, earnings continue to flourish as intel, J.P. Morgan, Coca-Cola and Google reported better than expected earnings. The Volatility index (VIX), which is a gage of fear, decisively broke down this week below the 2007 rising trendline, which signals less volatility going forward. Market breadth significantly improved as measured by the Advance-Decline line.

Last Tuesday, the S&P 500 daily chart got a backtest to its trendline that developed off the December highs. The backtest was contained at 1324, just one point above our target of 1323. From there, prices surged above two resistance levels at1367 and 1386, continuing to make higher highs and higher lows on the 60 minute chart. Prices rose right up to key resistance at 1396 and stalled there. This is the confirmation line of the S&P's double bottom. Once the pattern breaks out it measures 140 points with an objective target of 1536.

Just above the DB confirmation line is the intermediate downward trendline, once prices exceed that level it will mark the breaking of the third fan line (1st chart down). This will signify two things, first that the intermediate bottom of the correction has been seen, and that the correction is over. Parenthetically, come see the video on the fan principle at thechartpatterntrader.com. Moreover, the RSI now has multiple points of long term positive divergence on the daily chart of the S&P 500. And subsequently, the RSI moved above 60 for the first time since the October high, suggesting that a change in trend is about to take place. The RSI has had a difficult time, in each attempt it has made to rise above the value of 60. If it manages to rise above 66.67, the RSI mathematical ratio will shift the odds in favor of the bulls. Changing the RSI ratio from 1:1 to 2:1, meaning that there are twice as many up days as down days.

The trend-based indicators on the index daily charts remain positive. The ADX, Aroon and the MACD each have produced positive signals that a trend is developing, as this weeks low produced a minor trend channel. The DJIA monthly chart (2nd chart down) is starting to turn positive once again, as the MACD histogram got a bullish P-p-P signal, in addition to positive divergence. The full stochastic (14, 3, 3) is just two-points away from getting a bullish touch. Its RSI is in the process of rising to test its previous peaks. If that occurs the DJIA stands a good chance of testing the October highs.

The index weekly charts continue to be favorable as the MACD histogram got a higher bar for the second week in a row. The force index moved back into positive territory shifting the balance of power to the bulls. The S&P 500 has currently stayed above the previous descending triangle pattern on the weekly chart, for five-weeks in a row. Incidently, last weeks candlestick was a bullish engulfing bar.

On the Index charts, the double crossover method of the 10- and 20-day EMA continues to empower the bulls. Watch for both of those EMAs to cross above the 50-day EMA. This hasn't occurred since the triple bearish cross occurred in early-November. The 60-minute charts are now overbought, but still could go higher, and the 10-minute charts have not flashed a sell signal. I continue to believe that the market will do well until April 30, when the figures of 1st quarter real GDP are be released.

I believe that report will bring about the next major reaction that occurs, which should only be a contra-trend, and that the market will go higher based on the daily and weekly charts at this time. A fresh rally above resistance would be extremely bullish and bring new money into the market. Please come join me at thechartpatterntrader.com

The Walker Fan lines are back in play and it looks like the correction is almost done:


His monthly Dow chart is nice for its simplicity:


Ted has a very nice chart for Google (GOOG). Google Finance readers need to check it out. Note the tightening of Bollinger bands on the 15-minute time frame:


Semiconductors are looking a lot healthier here:


Richard Lehman is liking small caps over large caps. Sees the market as "unrealistically bullish here" and that was before Friday's gains:

4/17 -- Here's my view of what's happening. The market is extending its rally off the bottom, fueled I suspect by gobs of money on the sidelines (cash held back + cash frustrated with low rates + pension money that comes in at this time of year) and by the view by some that the worst is over for the economy. (Even the Economists seem very divided on that issue.) Chartwise, the short term uptrends are still fairly steep but are more well defined in both 5-min and hourly charts. There are a number of charts crawling up along the lower lines of steep uptrends. They could bounce upward off those lines for another good rally or they could potentially break. We should know pretty soon (like Friday), despite the expiration day games. Even another spike upward, however, will soon meet major resistance from declining long term lines on one and three year charts. So...we're heading higher until we break short term charts and the small caps look even more bullish than the large right now. But then watch out when reality hits that we've got a ways to go on the recession.

4/16 -- Seems to me the market is unrealistically bullish here, but the market is always right -- right? Probably just too much money on the sidelines that is scared to miss the recovery. Anyway, new ST uptrends are now in place, though the current legs are too steep to sustain, so things should flatten somewhat tomorrow. It now looks like the market wants to head back up to the long term downtrend lines on the one-year and three-year charts. For the short term, we will need more data for more realistic upchannels.

What happens when the Dow meets resistance will be interesting:


Although my favorite is his simple gold chart:


Finally, I will leave you with Yong Pan's summary. Looking for a short-term pullback:


His SPY notes make for interesting reading:

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Stockcharts Weekly Review

A bit late on this, but before Monday's open here is the weekly Stockcharts.com review.

Dr. Joe has his Currency Shares Euro Trust (FXE) prominent. What is interesting from this chart is the consolidation in play for the Dollar / Euro Trust. Should the dollar break down it will provide a boost for Gold, hurt the market and be business as ususal. However, should the dollar counter break higher it would set the cat amongst the bear pigeons. If this was to happen look for a sharp one-day gain, and look for this to happen real soon:


Joe's Dow Stochastics shows a well marked top with plenty of room before a bottom is reached:


Once again - keep an eye on Health Care. It looks like May will be the month it finds it bottom:


Ted Burge is watching the financials; support at $24.15


Although the point-n-figure chart has a target of $23.63


The Russell 2000 is at an interesting juncture; can 689 hold? If not, its 642 on the menu


The Point-n-Figure chart clings to 760 as a target....


Maurice Walker has his great essay. I don't follow the Aroon, but his comments on this are interesting. Triple Bottom looking best bet:

The sell off that I warned you about last Monday played out this week. A break down of the RSI occurred on the S&P 500 10-minute chart that day and we watched for prices to confirm the move with a break below the rising trendline. The RSI breaks down as the indicator falls below 33.33. The next morning prices gapped lower confirming the RSI. After a two-day decline a bullish falling wedge emerge in that same timeframe, which took prices back up to test gap resistance at 1370. Prices halted just three-points below the target at 1367. From there prices sifted lower producing lower lows (8th chart below).

This occurred simultaneously with the breakdown of our rising wedge patterns on the indices. The breakout of the falling wedge pattern on the 10-minute chart coincided with the pull back to test the trendline of the broken rising wedge. This backtest provided another opportunity of traders to take a short position.

Now I believe that the S&P 500 daily chart is backtesting its breakout of the recent declining trendline off the December highs. That trendline points to the 1320-23 area. I drew a speculative lower boundary for a channel in the 60-minute time frame, by drawing a parallel line mirroring the peaks made during our recent run. Using the March low as a refferance point I drew the parallel line, and it intersected with the trendline on the daily chart. They intersect at/near 1323. If that level of support did hold up it would mean that the S&P 500 would still have a higher low in place.

The ADX broke to new lows below 20 this week as the positive direction line +DI moved below the negative directional line -DI. This is the forth crisscross that has occurred since the March lows. This occurs when markets are stuck in a trading range and trendless. The S&P 500 is clearly moving in a lateral range as a possible double bottom is in play. If prices test the March lows again then a triple bottom could manifest.

However, if they fail to test those lows then we could carve an inverse head and shoulders pattern. The pattern the emerges depends on how deep the retracements are of our current reaction.

In contrast the Aroon, which another trend-based indicator continues to show strength, with the Aroon up line above the value of 70. While the Aroon down is behaving itself below 30. Additionally, the Aroon Oscillator, has broken above +50 for the first time since the October high. This is the first contra-trend that has managed to do that and this is the first time that a bearish cross didn't occur at the breaking of the contra-trends trendlline. This is a good sign, lets watch next week to see if the Aroon turns bearish.

The Average True Range (ATR) is a indicator that measures volatility. It cannot be used to determine directional movement. But when a high value occurs on the ATR it produces an extreme peak on the indicator which is an indication that a strong move has already occurred and is likely to be unsustainable in the future. Such is the case with the ATR on the S&P 500's weekly chart. It is at the same extreme levels that occurred during late 2002 just before the bull market began (5th chart down), which is one of many bullish signs on the weekly S&P chart. However, the ATR on the S&P 500's daily chart is telling a different story.

The ATR on the daily chart could be headed back up to test the two previous peaks made during the January and March price lows (1st chart down). The ATR reached extreme peaks while those lows were being carved out. With the ADX now signaling the absence of a trend and the MACD looking toppy again, it might serve us well to pay attention to the ATR. If it peaks at the previous extremes seen on the daily chart during the January and March lows, we may be able to determine as to what pattern is actually being constructed on the daily chart. Whether it be a double bottom, a triple bottom, an inverse H & S pattern, or even if prices break to new lows, the ATR will do its job by revealing areas in which could act as a reversal point.

Study the first chart below and you can see that each time a prices bottomed or topped, the ATR was at either an extreme high or low point. This resulted in the ATR moving in the opposite direction at the place where the extreme occurred. So this current reaction might produce another ATR extreme.

The Force index on the daily S&P 500 chart, had negative divergence on it both times during the last two contra-trends, which resulted in the the Force index moving below zero and the sealed the fate of the recovery. The breakdown during this contra-trend did not have negative divergence in place like the two times before. So I am wondering if the Force index will bounce off its rising trendline producing another point of positive divergence. This is speculation on my part, but I am watch the rising trendlines on both the Force index and the RSI to see if support holds. If it does both indicators will have multiple long-term points of positive divergnece on them, which is what ultimately changes trends. When the Force index is above zero the bulls are in control. When it falls below zero the bears are in power, and when it hovers near zero it signals that the market is trendless.

The technical conditions in the market are mixed right now, as oscillators tumbled over on the daily charts, while the weekly charts maintain bullish readings. Both the DJIA and the S&P 500 mangaged to see their MACD histograms move above zero closing the week in positive territory. This has not yet occurred on the Nasdaq. Accordingly, all three averages continue to have a rising slope producing higher bars. Both the DJIA and S&P 500 had a bullish cross of the MACD as the full stochastic line (14, 3, 3) line rose to just below the value of 50. Again the ATR is at extremes on all three of the averages. The downward trendlines on the oscillators was broke weeks ago. Lets see if buyers come back into the market once we have a backtest in play near the 1320-23 on the S&P 500. The indices must continue to pass a technical litmus test in order to validate any recovery attempt. Otherwise, the current attempt will fail and we will see lower prices. So far this recovery has held its own. Study the 60-minute charts next week looking for oversold oscillators, as a possible new minor trend channel is born.

Market breadth turned negative lastweek on the A-D line, as decliners out paced advances by a 7 to 2 ratio on the NYSE and by 4 to 1 on the Nasdaq. The VIX is bouncing off its 2007 trendline which is near the 200-day SMA. The VIX may test the 50-day SMA. But the VIX weekly chart has bearish signals.Next week we will get the PPI and CPI data for March on Tuesday and Wednesday. Come watch our video on the ATR at thechartpatterntrader.com.

His Aroon chart is given here:


And the extremes in the ATR suggesting the downward move is done:


Yong Pan has his detalied summary up; watching Financials and the QQQQs


For the S&P watching for a move back to 61.8% Fib retracement with a VIX 'buy' signal:


Richard Lehman is looking for a downward move down to (but not past?) March 17th lows:

4/13 -- Added FXI- iShares China upon request. Also, note Alan Abelson's 'Snake Oil' column in Barrons about how this recession has a ways to go.

4/12 -- What we now know is that the uptrend from March 17th (the assumed 'A' wave correction) is now over and that the possibility of this being a slope change but remaining upward is also out. That puts us in the 'B' wave back down, which could retest the March 17th low, but probably will not go that far. Some of the minichannels downward have accelerated, so I cannot give any lines to serve as a lower target just yet. I did, however, put in some tentative down channels.

4/10 -- The morning bounce gave the illusion that something bullish was brewing, but after the fade I see still see this picture as more negative than positive. I was able to combine some of the recent zigzags on the 5-minute charts into larger minichannels that are all heading down. We've had a decent rally off the March lows now but the rally just looks like its losing steam. At the very least, it is now moving up at a lesser slope.

4/9 -- The breaks came today on a number of charts and all were to the downside. There is a possibility that the rising channels off the March lows are simply changing slope. I drew those possibilities in green on the RUT and SPX hourly charts. Otherwise, we're in new declining short term trend channels.

4/8 -- Something's going to break soon. The Dow, RUT and SPX are all near their lower support lines on short term (hourly) charts. The Naz and QQQQ have rolled off upper lines already. Either there is another upward pop coming or we will see some breaks. It could start as early as tomorrow.

As a final chart, I will show Richard's Gold chart. Note the backtest of former support - will it break (and if it declines, watch the dollar consolidation)?

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