From yesterday morning:
"The overnight risk of a huge gap down in the futures is removed (futures currently are up a few points), so playing the SPX long for the Double Bottom certainly is reasonable, but I don't like the market well enough to play it. I particularly didn't like the action yesterday in the MOO, or in AAPL"
I preferred to be short AEM, but playing the SPX for at least a short-term Double Bottom not only was reasonable, it got a lot more reasonable when the SPX broke out of an Ascending Triangle yesterday afternoon at 758, and when the 774 target got MADE.
At the 743 close on Monday, the MACD histogram was at a "higher low" than where it was at the 804 January 20 low, suggesting a positive divergence on any rally. We can see that the histogram did tick higher on yesterday's rally. In a Bear Market, we can have positive divergences and even DOUBLE positive divergences, and price still goes lower, but positive divergences also can produce sharp rallies, as we can see off the October 27 low, and again off the November 21 low.
In my view, technical indicators don't TELL US to Buy or Sell. They don't know what the price chart looks like. I view them as information about the technical condition of the price chart, and when there are crossover signals and divergences, I view them as "invitations" rather than ORDERS to Buy or Sell.
Yesterday morning, for example, all that the MACD was "telling us" was, "The histogram is higher than it was at the January 20 low, and it's positioned to tick higher for at least a short-term positive divergence on a rally off this 'possible' Double Bottom at 743. Would you like to BUY this low-risk entry long the SPX?"
Those who accepted the invitation got rewarded, especially if they "took profits, or at least some profits," when the Ascending Triangle target of 774 got MADE.
The MACD itself still is pointing down. If yesterday's rally in the SPX gets legs, the MACD has a way to go, to get up to its declining signal line. If it does that, we could get a "Kiss Of Death" signal, similar to what we got in September (see the Skull and Crossbones on the chart). That was UG-UG-UGLY! The MACD turned down from the failed back kiss of its signal line, and the SPX tanked nearly 500 points, just from there. Yeesh!
Tuesday's close in AAPL, $2.00 below 88.90-89.00 support, concerned me. I don't like breaks of support like that. In yesterday's trading, a failure at/near that broken support would have confirmed the breakdown, like XOM did when it had a DOUBLE pattern breakdown. AAPL didn't fail at 88.90-89.00 support, as it "should have," so at the moment, the breakdown is a Bear Trap as long as AAPL remains above 88.90-89.00.
Similar to AAPL, the MOO rallied back and closed well above broken support, so that's also a Bear Trap unless/until the MOO goes back below the DOUBLE validated trendline.
What an unorthodox-looking 184% rally in AEM! Off the "dead drop" decline from September-October, AEM formed a Bear Flag/Rising Channel, a pattern which more often than not, has a bearish resolution. It had an UPSIDE resolution. On the way to the 58.25 target IN PLAY, December-January sure looked like a Rounding Top, just below the 200 DMA. That also had an UPSIDE resolution.
In the current time-frame, AEM failed at the top of the Symmetrical Triangle last Friday and again on Monday. Yesterday, it gapped higher at the open, which was the high on the day, then broke the bottom of the Symmetrical Triangle, at 51.63, finishing out the session at 50.61 on a Bearish Engulfing candle that engulfed the prior five days' real bodies.
That sure "looks" bearish, but I wouldn't put it past AEM to "morph" (change) into a Bull Flag here, given how deceptive that 184% rally was! LOL.
2 comments:
Melf,
On your MACD chart your note the kiss of death on Sept 23? why is the kiss on Oct20 approx. different?
Good Morning, Mark,
That one also resulted in a pretty good drop of 140 points, from a high of 985 on October 20, to a low of 745 early on October 28. It was a Kiss of Death, just not quite as deadly as the one in September ;)
The difference is that in October, the MACD was very oversold, it was positively diverging at the October 28 low, and most importantly, PRICE in the SPX double-bottomed. After the kind of HUGE decline that we had in September and October, that "suggested" some kind of Bear Market countertrend rally.
We didn't get the intermediate-term low until November 21, but that bullish divergence and double bottom in price on October 28 was good for a 162 point rally in the SPX.
By the way, if you look at the green arrow and green bomb at the signal line back kiss on December 29, that "slap shot" signal came when we were looking for Data Point #4 (low) in the patterns in the SPX and NASDAQ.
The bounce from that "slap shot" low to the January 6 Bearish Wolfe Wave #5 Fakeout/Breakout high was good for 87 SPX points.
I call it a "slap shot" signal, for lack of a better term. It looks like a puck coming into a hockey stick, and then WHACK ... to the upside.
As with any indicator, the Kiss of Death and Slap Shot signals don't ALWAYS work. They can tick down (or up) from the signal line, then turn right around and go right back up (or down). They have to be monitored, as does everything.
For example, if the SPX 985 highs of October 20 and 21 had got taken out to the UPSIDE after the Kiss of Death signal was given, I'd cover a short position.
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