12/1 Saturday
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$DJIA (Dow Jones Index)
$SPX (S&P 500 Index)
$COMPQ (NASDAQ Index)
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$MS-Neckline Testing
$GS-Forming Right Shoulder?
$JPM-Scenario 1
$JPM-Scenario 2
$FAS-Peculiar Looking H&S?
$C-Double Top Reversal
Double top neckline has not yet been compromised. Currently sitting on current support.
$BAC-Will Follow Other Banks
$10 is a major resistance. It has been holding strong for a whole month! Very strong resistance and we all know that the more it hits it the stronger it becomes. If the other banks fall, $BAC will follow for sure. Also it looks like forming a Double Top reversal like $C.
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My Thoughts
This is one of those ‘break it or make it’ moment.
The market has been in this downtrend for about two months now and with that “Nov/Dec market rally theories” many are expecting bullish run until about January 2013 as we have seeing last 2-3 weeks of bullish run. And hopefully that would be the case for many traders and investors whom are looking to profit from this Winter rally that they look forward to every year.
And please don’t get me wrong. I am not here to spoil the party but as a Technical Analyst, I always have to look at the both sides for my clients, investors, followers and for my own trading account. As my favorite Pastor used to say, “There are always two sides in the coin.” (and he was talking in terms of Biblical studies) but I find it fascinating that the analogy works on everywhere in life. Anyways, so here is my thought going into this week.
As I have been studying the market and the individual stocks last two weeks, I’ve been seeing some critical price level we are facing especially on financial sector. Why financial sector is important with the market condition? Well usually the financials are the first to lead in the market before the sharp decline in the market indexes. Just check your May 2012 price action on the Indexes and compare them with the financials. Financials were starting to form some sort of consolidation (some were already rolling over) on March 2012 but interestingly enough the Market Indexes were Bullish. Then when the market proceeded to decline sharply on May 2012, the financials continued with its bearish that had been started 1-2 months before the indexes.
Well for 2012 Oct decline, technology sector led the way and when I say technology sector I mean APPLE (This company is so big now that it took the whole market down with it!). I know this because I traded APPLE heavily with bearish positions when the whole market was extremely bullish.
And now that the Market seems to be very bullish here after finding the “bottom” but as you can see the financials weren’t following the Market Indexes. They stayed put and consolidated the last 2-3 weeks. That’s very similar to what happened last March – May on the Indexes and the Financials.
Does same thing has to happen next few weeks? Most certainly not. We can just continue go on with bullish move and financials may gain some strength and break those Necklines. No one truly knows where the market will go but we can only try to ascertain using PROBABILITIES and looking at the past charts and back-testing, I’ve found that we have high probabilities that the market will roll over next few weeks or at least a PULL BACK is imminent.
Bottom Line
Here is the bottom line. We break this Neckline to the upside and continue bullish, I would say that the bullish run will continue until January 2013. However if the Neckline holds true and it rejects the price, I do believe that we are going to another huge dive in the whole market and probably big decline in the financial sector.
What If?
You see the theme here on Financials? First, they have all formed bearish reversal formations and we are talking 3 months of worth! Second, they have been consolidating and we all know the longer the consolidation the bigger the fall. So the big question is what if. What if the market falls. What if market tanks next few weeks? What would happen to the Banks?
They will TANK and TANK HARD.
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12/4 Tuesday
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$DIA-Strong Reversal Candles At The Neckline
Last four trading days = Doji, Doji, Bearish Engulfing, Shooting Star.
All these candles are representing strong reversal coming on its way.
$QQQ-Reversal Candle At The 2nd Neckline
Monday = Bearish Engulfing reversal candle
Today = Hangman bearish continuation candle
$SPY-Reversal Candle At Triple Top Neckline
Monday = Bearish Engulfing reversal candle.
Today = a Spinning Top which represents a bearish continuation because it closed below yesterday’s close.
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12/5 Wednesday
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$DJIA (Dow Index)
Pay attention to the upper wicks. Neckline still holding.
$C
Great bullish move with monstrous volume. Last min sell off caused it to stay behind the neckline once again. $BAC is the only stock that broke out today and other Banks seems to continue to stay below the neckline. Will they follow $BAC tomorrow?
12 thoughts on “$DJIA $SPX $COMPQ – Neckline Resistance ($DIA $QQQ $SPY Update 12/5)”
Kay have you noticed any early tells of a shift towards safety such as healthcare as Belkin suggests will happen in a contracting market.
I watched the Belkin video again. Thank you for sharing this video Kay. I would have never found on my own. Safety was a poor choice of words on my part. Belkin refers to health care , as well as consumer staples and energy, as defensive plays but I get the impression they are by no means safe. After a quick look at these three, it looks to me as consumer staples is ahead of the pack. Kay, what do you see? Looking for the other side of the coin.
I watched the Belkin video again. Thank you for sharing this video Kay. I would have never found on my own. Safety was a poor choice of words on my part. Belkin refers to health care , as well as consumer staples and utilities, as defensive plays but I get the impression they are by no means safe. After a quick look at these three, it looks to me as consumer staples is ahead of the pack. Kay, what do you see? Looking for the other side of the coin.
@LittleRiver Hello. which video r u talking about that I shared? i guess i dun remember or suppose i forgot about it.. please link me for the video to refresh my memory.. well right now its too early to say.. definitely there are some warning signs but we would need more data to confirm that… id take it a day by day and see what the market tells us.
@2kaykim Yes; I was referring to your Michael Belkin video on your Market Analysis. I wondered if you looked at those sectors he mentioned as defense sectors. I briefly looked a few and they looked remarkably like the rest of the market. Here is a link to the NYP.ID NYSE health care index. Double top head and shoulders testing necktie…
http://www.marketwatch.com/investing/index/nyp.id/charts
Also looked at consumer staples. Here is a look at VDC. Most of the consumer staples looked like the VDC. Not sure why consumer staples is doing better than most but they are trending higher.
http://stockcharts.com/h-sc/ui
I did not look into bonds or utilities. But with local and federal government so far in debt it does not look like a safe bet either.
As Belkin says, “cash” is the only safe play.
@LittleRiver oooh Michael Belkin video that I posted on my Market Analysis! yea he is saying that Market will drop about 40% from 2009 lows which is about $11,000 on Dow Jones. Again there are some early signs of where the market is going to go and these warnings are flaring and you can’t ignore it. There are always two sides in the coin and good investor/traders always keep both in mind. So so many people are bullish in the market because of this Seasonal rally and they are not willing to listen to the experts while these experts always look at the both sides of the coin. here are also very interesting video u should take a look. http://www.youtube.com/watch?v=4ECi6WJpbzE
@2kaykim Thank you once more Kay. Another great video! The video really brings home the process by which bubbles are built and ultimately end. We may be looking at early signs of a BAILOUT BUBBLE getting ready to pop here as we gaze on your charts.. I found David Walker’s comments on the spending to be insightful. Much of the money it seems was wasted. Sadly this waste will lead to the bubble popping. Money in but it never comes back. 40% may be a modest number when one looks at the amount of money that was put into the system to get us where we are now. A number below 10,000 would not surprise me.
@2kaykim I tried to figure out where 11,000 number came from Belkin. In the video he repeats average market decline is 30% in a recession. I also saw a more recent clip of Micheal Belkin discussing the coming recession and he mentions using the 200 SMA “weekly” chart as an indicator to the level the market would decline. That number for the DOW is around 11,000. I am learning a bit more every day. Thank you Kay!!
@LittleRiver 200SMA weekly is $11,160 level~~~ yea i am expecting huge jump in the whole market as well… I am not sure if we are going do this on this neckline here or we gonna try to make to the recent high of this year. I like your attitude to learn this game.. if you dont give up and take time to learn it, you will do well.. =)
@2kaykim Thank you Kay. The honesty of your analysis posted here on your blog is inspiring myself and i am sure many others to learn more about TA. I am really enjoying the learning process though there is much to learn. Thank you!!
Looks like $C is hanging right above $34, are you primarily watching for a break below $34 or a close below $34?
@daytrader305 it doesn’t matter to me as I am still holding Puts since $36.70 however the $34 support has to be broken for it to really TANK, If it close below it today, expect huge dive this week