First to the prices:

It was a wild ride this week with the Dow ending up down only .24% for the week but the more broader indices continue to show weakness and they were down a comparison 2.55% on the Rut and 1.77% for the Value Line.

Again that –2.55% is not enough to knock us our of our RRY Rut trade triggered off the 4% buy signal so we continue to hold and hold with a long-term bullish mindset.

If you are in our trading room at TTTHedge.com or get my mid-week milepost and updates you have heard me say that the Russell 2000 needs to show some leadership here before we can go the next thrust up. 

Here is this past weeks price action on both indices. Note how the Russell 2000 was making lower highs and lows while the SPX was gaining.

The RUT weakness is demonstrated in the the price action here as shown with a series of lower highs and lows while earlier in the week the SPX was making new highs and higher lows.  On Thursday I thought that maybe the pullback would not be as strong (4-5%) as previous pullbacks on the SPX and that instead of getting to the targeted 1046/1068 SPX area we might only pullback to the 1068/1079 area.  On Friday’s close I started adding to my long position based on hitting the 1079 area.  We will see this week if we have topped or if this is a pullback to aim at a higher top.

 

 

Percentage of Stock above 40 DMA:

These are how these charts were left on Friday:

The top chart is the number of NYSE stocks above their respective 40 day moving average and the lower chart is the same for the Russell 2000.  The horizontal red line on the Russell 2000 represents a historic bullish pivot point for this indicator to turn around on.  For the bulls amongst us, we would like to see that magenta line turn up and cross above the 70% line sometime this week.

10 Day High – Low:

In order to allow me to compare 10 day highs – lows between indices, I changed the charts to be percentage based this week.  These are the current values for the SPX and the Russell 2000:

We are still on a sell signal with both of this charts but we do have one day in the books of a trend reversal.  Check out the relative weakness between the Rut and the SPX.  The Rut closed Friday with 19.4% more stocks making new 10 day lows than 10 day highs compared to the SPX which is at 6% more lows than highs.

In order to turn this indicator up and confirm a “buy” Monday’s close needs to beat the 40% bar on the SPX and 16% bar on the RUT as pointed out by the double headed arrow.  That would be a major rally.  The danger for this indicator is that we closed fairly close to the lows for the week on both indices, any break lower will spike both of these down and ruin the one day trend we established on Friday.  So if you are in the room on Monday or monitoring Twitter we will update the 10 day High-Low signal.  A higher close on Monday should bring us closer to a buy signal as Tuesday’s bar on this signal is quite week at –8% ish for Rut +18% is for the SPX.  Meaning if we do not move too far down on Monday we could see a reversal setup as soon as Tuesday.

52 Week Highs:

The 52 week new high indicators have been in this “every-other-day” oscillation for about 3 weeks now since the beginning of October.  I find this very worrisome as it might be long-term topping indicator. It also does havoc to our simple 5 day moving average.  Notice that both the NYSE and the RUT have a two day bullish pattern but we have had that over and over again.  The bulls have their opportunity on Monday to reverse the process by building a higher bar than Friday’s bar of 182 on the NYSE and 66 on the RUT.  Pay attention to the New High data published every 30 minutes on http://twitter.com/Redsdata.  That D1 number needs to stay + all day.  In order to turn the indicators into a confirmed buy signal the day-5 bars are very high and it would take a huge rally.  A simple higher bar would flash bullish and last Tuesday’s bars on both indices are relatively low enough that Tuesday could be a reversal day and send this indicator into the buy direction.

Anything lower on Monday will keep us on our sell signal.

Zweig:

Since the beginning of the Thrust, or two days into it I have been worried about the lack of follow through.  Most of the successful thrusts that have taken us to new highs have broken that overbought area of 60 (signified by a green top).  This thrust did not make it there and we are correcting.

The Russell Zweig tends to get into oversold before turning back up and we are not there yet.  We sit in neutral territory here with the momentum in the Bears camp.

Monday, for the bulls to turn this thing around they need to get to that positive A/D area and preferably above the 2:1 so if you are in the room watch the A/D race lines for a close above 2:1 for the bulls, lower for the bears.

Conclusion:

While we are in a sell period I have not seen anything yet that tells me this bull run is over.  I still expect to see another dash for the top and some type of exhausting run of new highs.  We have not broken any of the templates setup during the other thrusts.  If we do rally from these levels I think we can go quite a ways and possibly be putting in a long term top.  A rally from these levels while short-term bullish would make me become more longer term bearish.

Falling another 2 or 3% from here down to that 1046 area on the SPX would still be quite normal and a run form there with a decent thrust would indicate we go much higher and maintain a long-term bullish outlook.  A breakdown below 1035 would be a major pullback indicating a resetting of the markets.

Monday and Tuesday will be key days for setting the pattern over the next 10 days or so.  I have given you all some things to look at over the next couple of days to help you setup for the next leg both up and down.

We have a lot earnings reports that bulls and bears will be spinning this week.  Econ data starts on Tuesday with Schiller home price index and consumer confidence. Wednesday we get Mortgage apps and Durable Goods before the bell and at 10:00 am we get New Home Sales followed by the weekly Crude Oil inventories at 10:30.  Thursday we get our first print of GDP that has a high forecast of 3.10%.  That is quite a high bar to set. So the week should be quite volatile so hold on, watch the data, watch how the market reacts to these news events.

Stay tuned..

See you in the Markets

Marlin  aka: RedlionTrader

The correction has begun.  Or has it? The bears are certainly thumping on the blogsphere.  Computers were running full speed last night spitting out short candidates. As near as I can tell the beige book was the catalyst that caused a perfect timing sell-off.  A weak new high (SPX new high on lower 52 week new highs)was put in place which is always a dangerous time and a reason to tighten up stops (which apparently a lot of people did as it cascaded into selling).

Let’s just look how price is setup:

This past six trading days look very much like the top set in place starting September 16th.  In fact they look pretty identical.  Six sideways trading days ending a thrust which ran bumping up against new 52 week highs for the six days and then selling off.  The 9/23 candle that started the pullback could actually be swapped with yesterday’s candle. They look the same!  Both the September 23rd high and yesterday’s high have become third rail highs, that is they rallied up to make new highs and then closed back red (like they had touched the 3rd rail of the subway).

Here are 30 minute charts of the two days.  Yesterday’s bar hit its new high earlier in the day and then sold off immediately trying to to hold-on but failing during the 3pm bar.  The 9/23 bar rallied in the afternoon put its new high in and sold off during the afternoon.  You can see from where the final bar sits that the sell of from top to bottom on both bars is about 1.75%.

So we have a good template to follow? You might ask.  Yes, but for the same reason I have always been a bad test taker I am a little suspicious in here.  It is all setup too good.

There are two things that bother me about this setup, the first is the obvious nature of it.  I should just suspend and trade from the charts.. remember everyone is seeing the same thing this am.  The second was that sudden nature of the selloff.  The 9/23 high sold off immediately, 10/21 high plateaued for a while then sold off.

On 9/30 we had a similar sell off in size and nature only to rally back the full amount and then sell-off again.

My point being that the market can do just about anything it wants today.  As of now the Initial Jobless claims is not out and that could cause us to rally. So as obvious as it seems it is still dangerous out there.

I will show you one more price chart and that is of Sept 24th, which was the day after the last 3rd high.

Many were expecting a gap down today, I thought we might possibly get a gap up based on overseas and morning econ data and earnings.  Right now at 7:42 we are basically flat most earnings are in but economic news is yet to hit.  So if we are going down and we do gap up you can expect that gap to fail based on the 9/24 behavior.

Other Indicators.

I spent a lot of time this morning on the price charts because they are setup in a perfect mimic pattern of 9/23.  If some of our other indicators were not flashing sell I would be very suspicious but this selloff has been in the making for a few days now.

Zweig:

 

I have been writing since the third day of this current thrust that the power behind it has been weak.  Our Zweig is now closer to the oversold condition than the overbought.  This would indicate that we might not selloff as hard as we did on the last correction, maybe a 3-4% vs. that 4-5%.

52 Week New Highs:

Our new highs have been flashing top since we have been making market new highs without breaking out into new highs of 52-week-new-highs.

10 day Highs – Lows:

These have been steadily eroded showing weakening underpinnings to the market.

% of stock above their 40 DMA.

 

This graph is the number of NYSE stocks that are selling above their 40 day moving average.  We have been using the crossing of its 19 day moving average to generate a sell signal and that happened with yesterday’s close.

Conclusion:

This market has been signaling top for few days now.  Is it the 8 to 10% correction?  I don’t see that.  I was concerned about the Rut not making a new high before this interim correction but that happened yesterday.  I would expect to pullback like the 9/23 pullback but we might surprise ourselves by having a shallower pullback than that.  Maybe a percentage or so less.  So instead of the 1057/1046 area we might only pullback to the 1068/1057 area.  This is based on the Zweig already being close to oversold and the amount of cash ready to come in and buy this market.  Tomorrow the indicators might tell another story but this is what I see for now.

I will let you know when things look more bullish.  I do believe there are still new highs in our very near future.

 

See you in the markets.

Marlin aka: RedlionTrader

I have up loaded the Market Thrust indicator for TradeStation onto my Google Site.  The indicator can be accessed here:

http://sites.google.com/site/redliontrader/market-thrust

Fell free to download the indicator and use as-is.

 

At some point in time I will write up info about the indicator, but in general if it is pointing up.. the A/D and Adv./Dec. Volume are in alignment and the market is in a bullish trend, pointing down is a bearish trend.  When it is moving opposite the market, a divergence, trade the market with caution.

One observation is that in the last hour of trading the indicator often diverges.  I have never investigated that, instead I don’t use it after 3pm.

Have Fun.

Marlin aka: RedlionTrader

 

Today’s weekly will be written and full of confusing directional information.  Last week’s OPEX and news driven trading and market top behavior have left my indicators in mixed modes.

On the Bulls side first and foremost is price action. 

We ended another week with between a .9% and 1.5% gain on most indices. The failure of the Rut 2000 to make a new high this week and to come in at a weaker .2% gain is bearish and needs to be corrected one way or another this week.

 

The percentage of stock above their 40 day moving average stayed relatively strong all week with no crossing of its 20 day moving average.  We have been using weakness in this indicator to get short and we are not there, although one day of selling would set us up.

Our the bear side we have developed thus far a failed thrust. This is the 10 day EMA of the A/D line for the Rut2000. Notice that unlike other price thrusts from corrections in this March 9th run, we have not been able to make it to the 60% mark.  It appears to have already topped and heading back down to base out another thrust.

On the 52 Week new highs we have the 5 DMA pointing down which shows developing weakness.  It is also interesting to not however that we have been putting in new price highs about 3 to 5 days after the highest new high bar in each thrust.  The violet lines show the high New Highs bar and then a sideways consolidation with a new price high happening on the second violet arrow in each thrust here and then followed by the correction.  We could be setting up to do the same on this thrust.

 

The week ahead.  I am going to hold out for an audible based on Monday’s action.  While that is a cop-out and unfair for those that only get my updates on a free weekly basis.. I need one more market day of data to setup the indicators. So for the TTTHedge.com members stay tuned. For those that are not you can either join or infer from my tweets.  In general I think we go sideways.  We have a good chance of setting new highs and having the Rut begin to participate.  If the Rut does not confirm with new highs, or we begin to get a rash of bad eco data and earnings we could begin a sell-off into that 1047 SPX area.

.. Stay tuned…

Marlin : aka RedlionTrader.

Good morning.  The market is still in a bullish mood although Tuesday was sending out divergent messages via the indicators. Tom in the trading room correctly pointed out that sometimes you need to put the indicators away, particularly when news trumps and Tuesday was “all about the pending news”.  Monday was  a very difficult day to read and I came to the conclusion that this Columbus day was a pseudo trading day with very light volume, a historic expectation based on the anniversary of a 1000 point day from last year, the first day of OPEX and the first day of earnings week.  That cocktail made for a difficult day to read and trade.

Tuesday the traders returned but not the volume and the response was muted.  The New Highs indicator turned bearish and the market was not excited as we turned in an NR7 day.   Here is the current state of the New Highs.

 

You can see how on the close of Tuesday the yellow line on the New Highs took a turn down.  Had the Intel news turned bad the market was ready to sell.  Well the pause that refreshes was happy with the Intel news and 10,000 Dow was in the sights.

The Zig-Zag pattern on the new highs (Every other day making a high bar / low bar) makes for an interesting math problem.  Since the 5 day simple moving average I am using simply replaces the 5th bar with the new bar our magic number (the number needed to keep the 5 day pointing up or down) will zig zag in the same pattern.    Today we will be replacing that 400 new high bar set last Thursday so it is a very high challenge to keep the yellow line up and happy.

Zweig:

On the Zweig front I have had a problem with this current price thrust since day 3.  It is not as clean or powerful as the previous thrusts marked out in yellow arrows on the chart below.  The Red arrows point out the type of topping action that the Zweig makes when it is finishing up the thrust.  Our topping action is beginning early.  We have not made it into that overbought area yet above 60 and it will need to show some strength in here to get there.

So for the rest of the week we need to read the markets for any directional change.  Right now we are pointing up and we have burst the Dow 10K level.  Next is the SPx 1100 on the radars and the Dow 10K needs to start forming support.  Today will be decisive as we see how close to the 400 new highs we get, do we follow through from yesterday trend day, does our Zweig point back down?  When the bell rings at 4pm today we will know much more about the character of this market, in the meantime be careful, we are still in a dangerous mix of OPEX and earnings.

So the read is that while the price action looks very bullish and based on price this thrust from the recent pullback looks like the previous ones, the indicators are telling us that underneath there is reason to be concerned.  The markets are making new price highs on lower Zweig values and our 52 week new highs are not capable of carrying momentum through from one day to the next. That is very interesting. 

 

See you in the markets..

Marlin aka: RedlionTrader

 

Today for something different I have done the weekly update as a video.  The expectation was that it would be quicker than writing and since pictures are worth a thousand words and I could explain the pictures more clear than in my writing, this was going to be a win-win.

You can see from the video that I taped it (a second time) at noon today EST. It is now 8:30pm and I have just finished uploading it.  Goal number one of quicker turn around has not been achieved.

Let’s see if the second goal of more clearly explaining the new 52 week high indicator and why I remain bullish even with an onslaught of sell recommendations.

11 October 2009 - Weekly Market Update from TTTHedge.com from redliontrader on Vimeo.

I will see you in the markets..

Marlin aka: Redliontrader

I have had a request to share my TradeStation Ticks indicator.  This is one of my favorites that I have developed but I also need to credit Linda Raschke for helping me to turn the raw ticks into an indicator.

The NYSE ticks is the only indicator that I know of that can lead the market.  I run my tick indicator on the minute time frame and often the 1 minute ticks will make their extreme a full minute or even longer before the market does. 

First, for those that don’t want to read my dribble you can download the worksheet that contains my tick setup by simply going here:

http://sites.google.com/site/redliontrader/ticks

 

Explanation:

This is the tick chart from October 9th, 2009.  The NYSE ticks are simply the number of stocks on the NYSE that are currently trading on an downtick subtracted from the number of stocks currently trading on an uptick.  If I remember correctly the value is captured every second.  You can display the ticks as a symbol by simply entering in $TICK as a symbol name.  You will notice that the raw chart itself is very noisy.  The trick to the tick is having the ability to turn the noise into a signal.

My method uses all standard TradeStation indicators.  First I take the raw data and turn it dark to help fade into the background.  There is information here but I don’t want it to “drown” out the primary signal we are creating.  You can faintly see the tails from the underlying raw data in the eclipsed shaded areas showing potential reversals.

Once I fade the raw Ticks into the background I put a 3 period linear regression curve onto the raw data.  This becomes my primary signal.  I also generate a 120 minute Bollinger Band (BB) that uses the average of the (high+low+close)/3 and +/- 2 standard deviations.  These bands will contain our tick signals and point-out extremes.

Also on the chart I have placed a zero line and a line at extremes +/- 1K.  In general ticks that get to these area are extremes and requite some interpretation.. either jump on or get ready for a reversal scalp.. because the ticks won’t stay here for long.

Most of the time the ticks will move up and down in waves from the top BB  to the bottom BB.

Interpretation:

The way I think about the Ticks is this: When the ticks have been below the 0 line and moving above  (trading +) the market is beginning to be bought at the ask, all the desperate or easy sellers are gone and now buyers are having to pony up.  The higher the ticks move into the positive territory the stronger the sellers are and the more interested the buyers are becoming and are beginning to chase price. Of course the opposite exists in the negative direction, sellers are dumping and buyers are picking up bargains.

This constant daily tension exists 95% of time between the upper an lower BB.  When the ticks move outside the bands one can begin to interpret the markets intentions. 

I have no set of trading rules to give you, you’ll need to develop those yourselves but I can give some guidelines.

One thing to look at is the 120 minute average smack between the BB’s.  Above 0 lets you know that market ticks have been bullish, below 0 bearish.  Their current trend (rising or falling) is noteworthy also.  On this particular day in the picture I was bullish on the day based on overnight research.  So I bough most of the ticks that extended below the lower BB.  One rule I have found is don’t hurry.  Wait for the tick to return back above or at least make a turn before entering.  Often the best entry is a minute or so after the extreme ticks that have driven the signal below the BB.

I keep a very tight stop because I am either right.. this is a pivot point, or I am wrong.  When I trade BGU for instance I might only use a .10 stop on a 1000 share trade that risks $100.  If the stock instantly moves in my favor at .10 to .15 cents depending upon the day I move my stocks to b/e.  I take a lot of stops during the day.  My goal is to get at least .20 or better yet to ride a wave up gaining 1.00 or more.

I exit my trades when the ticks move to the opposite extreme. If I think there is more upside I might only take 1/2 off at that point.

If you watch the ticks overtime you will get a feel for what the market is doing.  You will notice buy and sell programs that instantly move the ticks from extreme to extreme.  You will see battle zones like the reversals marked on the chart above.   When the signal goes to the 1K extremes and stays there, you will see panicked selling and buying.  I run a clock on my desktop that is synchronized 4 times a day to an atomic clock somewhere out there in internet land.  You will see a difference between the beginning of a minute versus the end of the minute (always let the tick close before deciding). The first few seconds are the time related trades that are computer setup.. Look at 1pm on this chart.  See that gap up bar?  Someone had a buy order set for 1pm which spiked up the tick.  See the green tail up around 780?  The buys hit a bunch of asks (ticked up) and triggered a bunch of sell stops which reversed the market down about .75 where buy orders or the same thieves that triggered the buys at 1pm picked them up and drove them higher (remember all those sell stops were cleaned out at 1pm) so up and over that price the market went.

Conclusion:

The Ticks are one of my favorite indicators.  I use them extensively for scalping or for timing my entries into longer trades.  Extreme BB readings allow me to enter at potential zero drawdown areas and allow me more quickly to get to breakeven stops.  I hate drawdowns. I hate them worse than loosing a potentially good trade, stopping out too early or not getting my best potential out of a trade.  My rule number 1 is “don’t loose money” and as quickly as I can set those breakeven stops the happier I am.

Play with the indicator, change the values around.  You can replace the linear regression with a  moving average, and reduce/increase the length or deviation size of the BB.  The NYSE Ticks are a very versatile tool and have become a part of my bread and butter scalping.. thank you Linda

As a child one of my favorite Saturday morning cartoons was Astroboy.  My parents had a television in their room and on Saturday morning after they left the room I would sneak in, climb into their big bed, snuggle down and watch the black and white Japanese anime (only later in life did I realize that Astro Boy was really Tetsuwan Atomu, translated from Japanese “Mighty Atom” and was an important data-point in the development of anime).  There is a new Pixar type animation movie reviving the title coming out this week and between the advertising for the movie launch and our new market launch I have found myself singing the Astro Boy opening theme song all week.

There you go, Astro Boy,
On your flight into space
Rocket high, through the sky
For adventures soon you will face! …

… Crowds will cheer you, you're a hero,
As you go, go, go Astro Boy!

Here is our ES chart:

 

Our latest correction came down and touched briefly the 6% pullback area and has steadily marched back.  Overnight the ES has rocketed up locking out those not invested of the 2% to 1% area.  Hopefully this AM’s gap will sell a little and give us chance to play in that 1054 – 1064 range.

Getting up and over 1065 will stop the pattern of lower highs and once again put us on the path to set yet another post March high in the market.

Yesterday’s close was problematic for me.  Our Zweigs put in a little crinkle.  Those in the trading room get to watch live the A/D lines as I drew a line in the sand of where we needed to close to keep the Zweigs happy and we missed considerably.

 

As a result, our Zweigs have a down-turn during an upward thrust, which when this has happened since the March bottom has been a precursor to a failed thrust such as in the beginning of July.

 

That was the negative side to yesterday’s close.  On the strength side the new 52 week highs were coming in fairly strong making me doubt any type of real selloff.

This is our Russell 2000 new highs which were the strength yesterday.  We did not surpass the new high count from the day before, but intraday even with a weakish  A/D lines investors were willing to buy in fairly strongly the day before’s new 52 week highs.  Quite a bullish indicator and this is what gave me backbone to climb aboard BGU on the double bottom to ride the rally into the close.  The way this indicator works is our 5 day moving average pointing up confirms a bull leg, pointing down confirms a bear leg.  The next couple of days the bar to keep the 5 day pointing up are very low so we will be in this mode for a least two more days. 

One thing to note here is our ability to make new market highs with lower 52 week highs on the RUT.  Our largest RUT 52 week new high day was in the middle of July and we have made 3 new market highs since then.  We will have to watch to see how high we get during this leg.

 

The market says higher, the underlying sentiment says higher and the hypothesis for the valuation of the market will be tested over the next few weeks during  earnings season using two data points.  The first affirmation will be that the bets that drove the summer rally had been correct, that is to say that the earning hit their expectations.  The second affirmation and the most important will be the expectations that are set for the year ending quarter and beyond which will allow more money to flow into the markets which is what we need to drive up the market to even higher levels.  A failure to appease could pull the rug out but for now it looks like go go go Astro Boy.

 

See you in the markets

Marlin aka RedLionTrader.

As a child one of my favorite Saturday morning cartoons was Astroboy.  My parents had a television in their room and on Saturday morning after they left the room I would sneak in, climb into their big bed, snuggle down and watch the black and white Japanese anime (only later in life did I realize that Astro Boy was really Tetsuwan Atomu, translated from Japanese “Mighty Atom” and was an important data-point in the development of anime).  There is a new Pixar type animation movie reviving the title coming out this week and between the advertising for the movie launch and our new market launch I have found myself singing the Astro Boy opening theme song all week.

There you go, Astro Boy,
On your flight into space
Rocket high, through the sky
For adventures soon you will face! …

… Crowds will cheer you, you're a hero,
As you go, go, go Astro Boy!

Here is our ES chart:

 

Our latest correction came down and touched briefly the 6% pullback area and has steadily marched back.  Overnight the ES has rocketed up locking out those not invested of the 2% to 1% area.  Hopefully this AM’s gap will sell a little and give us chance to play in that 1054 – 1064 range.

Getting up and over 1065 will stop the pattern of lower highs and once again put us on the path to set yet another post March high in the market.

Yesterday’s close was problematic for me.  Our Zweigs put in a little crinkle.  Those in the trading room get to watch live the A/D lines as I drew a line in the sand of where we needed to close to keep the Zweigs happy and we missed considerably.

 

As a result, our Zweigs have a down-turn during an upward thrust, which when this has happened since the March bottom has been a precursor to a failed thrust such as in the beginning of July.

 

That was the negative side to yesterday’s close.  On the strength side the new 52 week highs were coming in fairly strong making me doubt any type of real selloff.

This is our Russell 2000 new highs which were the strength yesterday.  We did not surpass the new high count from the day before, but intraday even with a weakish  A/D lines investors were willing to buy in fairly strongly the day before’s new 52 week highs.  Quite a bullish indicator and this is what gave me backbone to climb aboard BGU on the double bottom to ride the rally into the close.  The way this indicator works is our 5 day moving average pointing up confirms a bull leg, pointing down confirms a bear leg.  The next couple of days the bar to keep the 5 day pointing up are very low so we will be in this mode for a least two more days. 

One thing to note here is our ability to make new market highs with lower 52 week highs on the RUT.  Our largest RUT 52 week new high day was in the middle of July and we have made 3 new market highs since then.  We will have to watch to see how high we get during this leg.

 

The market says higher, the underlying sentiment says higher and the hypothesis for the valuation of the market will be tested over the next few weeks during  earnings season using two data points.  The first affirmation will be that the bets that drove the summer rally had been correct, that is to say that the earning hit their expectations.  The second affirmation and the most important will be the expectations that are set for the year ending quarter and beyond which will allow more money to flow into the markets which is what we need to drive up the market to even higher levels.  A failure to appease could pull the rug out but for now it looks like go go go Astro Boy.

 

See you in the markets

Marlin aka RedLionTrader.

Past Week:

We have had our second week in a row lower but we are still in a very bullish run here.  Our lowest pullback has tested that 20 week moving average, it looks like our current 20 week average and price might converge sometime this week around the 1000 mark on the SPX if we do not rally from here.

On our 30 minute daily for the week:

Monday and Tuesday it looked like the correction was over, only to see Wednesday start off with a large selloff and then a grind back to green then back to red with a nice green bar at the end.  Thursday morning we sent some research to our members indicating that most likely the selling was not over and that we had further to correct.  Thursday was a trend down day which we watched develop on the charts all day in the trading room.  Friday was our employment gap down where we climbed back all day long not quite closing in the green but still off the lows.

 

Looking at the Russell 1000 and 2000 - 250 day New Highs these continue to deteriorate and the Russell 1000 turned from sell to neutral.  To become bullish we need to see these return to  piling on some more new 52 week highs.

 

This is a rework of our pct pull back chart on the SPX combined with the number of stocks in the RUT 3000 that are effectively above their 40 day moving average.  For the 3rd time since March, the SPX has moved below the 40 DMA and our bull/bear indicator currently sits at that 42% level.  To become short term bullish we would need to see this indicator begin to point up and a confirmation would occur when we cross back up over the 42 bar moving average.

These indicators can improve quite rapidly so I reserve the right to become short term bullish intraday.  We are at levels where we have corrected from in the past and if you are willing to hold for longer periods should prove to be good entry points.  I believe that new highs are ahead of us based on the overwhelming bullish sentiment that has driven this market up.  This type of sentiment takes time to dismantle and if history proves a blueprint for the future we should begin to make new highs on weaker sentiment and technicals.  We need some confirmation and are watching for it in the price action, 52 week new highs, our 10 day hilo indicator, the 40 day moving average indicator as well as our Zweigs.

I remain neutral on the the short term 1-5 days until we see either further weakening or strengthening but bullish in the 5-20 day time frame as well as long term. 

While our weekly outlook is good for getting you started, daily updates and intraday updates for our members are what makes the money, particularly in market turns.  If you are interested in finding out more about our trading group and perhaps joining us give a visit to our website: http://TTTHedge.com to find out more about us and our services.

See you in the Markets..

Marlin aka: redliontrader

It has been a while since I sent a milepost mailing out, one reason was my vacation to wine country to Sonoma and Napa Valley, which was awesome by the way.  Great weather, great wine and great people.

I continued to work during what I termed workcation trading until about noon EST ever day and watching some of the indicators I had on the road with me. I mostly scalped BGU and BGZ using my tick entries with a goal of making enough money to pay for the current day.  I was successful most days.

Now I have been back 3 days and am having a hard time finding the rhythm of the market.  I was expecting a correction between 3% and 4%, even maybe a little bigger to put the fear of October into the bulls.

On Sept. 24th and 25th we got our correction and it was time to shift into bull mode, correct?  Coming home and  looking through the charts I am unsatisfied with this correction.  The drop off of new 52 week highs was dramatic and much damage was done and our % above their 40 day moving average chart issued a sell signal, but the recovery on the 28th was very dramatic and our correction become runted.

Here is our 10 day h-l to illustrate my point.

Hopefully you can click on these pictures and get full resolution.  You can see that those two down days on the 24th and 25th sent our 10day high-lows into negative territory, on the 28th we went positive again.  I fully expected the 29th to also become higher than the 28th but instead we are heading back down.  Yesterday our 10dayH-L value closed at –466. To compare to other recent pullbacks you can see that we usually apex around the –1000 number and we have not made it there yet.

So was the 24th and the 25th our correction?  My symmetrical mind wants to throw out those two data points.  I am going to blame those two data points on market shenanigans and pretend that those days were really the results of fund managers desperate to hold onto profits going into the day-3 of the quarter and that our pullback is yet to happen.  That was my trading thesis going into yesterday.

Yesterday’s opening plunge to the 3% line had my head nodding as I thought “yes, here is our correction”,  fully expecting to test the lows of the 25th or down to the 4% while giving me my –1000 reading on the 10dayh-l indicator.  Instead we rallied all day back to green and then down again, although not as far and I only got to –466 on the 10dayh-l.  Maybe that is all we are going to get this time.

So in my trading today I am still waiting for the “real” min-correction (i am talking about 4% type correction here to be clear) but knowing that this market can snap back at any moment.  There are plenty of buyers out there waiting to jump in at the sign of a bottom, many of them confused like me.

Here is the Rut 52 week new highs.  If you compare our new highs to the 24th and 25th we look as if we are re-building new high momentum, but if like our 10dayh-l you throw those two data points out you see we are still deteriorating in a pullback cycle.  That last thrust up deserves a nice rest. 

It truly might be over and we may be on our way to new highs.  At the same time it is good for us to know that this pullback did not give us that flush that the others have done and has left our indicators in mixed states, even between markets, that I have not seen before.   Ignoring the 24th and 25th straightens that out for me but choosing your data is a very dangerous thing.

If we do correct the ESz numbers to watch are 1035.75 which is the previous low set on the 25th and the 4% pullback number which is 1032.75. If not there than see you at the top!

Happy trading

Marlin aka Redliontrader