Slope Of Hope with Tim Knight

Marooning the Bulls on Dickwad Island

Beary Beary Good

I'm having a sneaking suspicion I might not have time for a video, but I'll certainly have time for a longish post this evening at 5 p.m. my time (yes, my day is really chopped up, and I have to plan ahead). In the meanwhile, here's the candlestick on the ES. I'd say today's poke-the-bull-in-the-eyes fake-out from this morning bodes well. I'll have lots more to say later tonight.

The Cubes Want to Move Down

The chart of QQQ is really interesting right now. Below is a candlestick close-up of recent activity. As you can see, in spite of bullish efforts to push higher, the bears are still in control (albeit barely). We are below the trendline which, until recently, supported the entire lift from March 2009. Just about any kind of event - - oh, say, like a drop in GOOG after today's close - - would send this index tumbling.

Sad Bull Faces

Well, the bulls had their main ally - Ben "King of the Juice" Bernanke pretty much flat-out announcing QE3 was on its way to Congress. Assets immediately zoomed higher - - gold shot up, silver shot up huge, the miners ascended, ES, NQ, you name it - - and then it all went limp.

It may be somewhat telling that in spite of Shalom's hell-bent destruction of the dollar, the giant TLT bond fund actually made a new high for the year today!

For the sake of balance, I acquired some long positions today. Most of my positions remain short, however, and I think it's fascinating that the IWM created two shooting stars in a row.

Fantasy Islands

As I am going through charts, I am seeing abandoned babies everywhere. OK, that sounds kind of sick - - let's use the term "island reversal" instead. There are a multitude of interesting candlestick patterns, based on today's gap down.

Tough Week For Bulls (by Drew)

Hey Slopers, Drew here from PT with a new issue of the Weekly Market Digest. Stock markets declined last week as investors locked in profits following a quick move to new highs.

Enthusiasm spurred by news of Bin Laden's death quickly faded, and equities sold off for most of the week.

A small bounce on Friday helped to pare some of the losses, but for the most part the general indices were down between 1.5 and 2%.

In the prior Market Digest, our outlook was extremely optimistic. The NASDAQ Composite had confirmed a decade long high, and a number of other indices had cleared some major resistance levels.

Sometimes we can get ahead of ourselves though, and it looks like over the short-term, we did just that. A perfectly normal pullback ensued, and our unwarranted enthusiasm was curtailed.

Last week, we experienced a sharp 4-day decline that ultimately drove prices to some key short-term support levels.

Based on the prior week's trading, Thursday's low near 1330 is a key support level to watch. Also, we may see some sellers come out if the bulls can drive prices into the 1350 area. 

Although the bears controlled a majority of last week's price action, the daily chart still looks healthy.

The S&P 500 closed the week above the 20-day EMA, a key short-term support level. Also, the benchmark index appears to be catching a bid near trendline support as well.

We recently confirmed a head and shoulders bottom breakout, and I believe that this pattern is still in play. It is fairly common to see a pullback to the neckline after an upwards breakout, and as long as this former resistance area is defended, the pattern is intact.

So, this neckline support zone near 1340-1350 is a key area to watch over the intermediate-term. 

Last week, both of the key indices that we track closed lower on above average volume.

However, no major damage was done to our intermediate-term outlook. Why? Because equity markets continue to trade at or near long-term highs, and as a trend following investor, it would be prudent to give the underlying uptrend the benefit of the doubt.

The NASDAQ Composite and S&P 500 both found support near their 10-week moving average lines. This is a positive sign for the bulls, and it shows that instutional investors are stepping in to buy the dips.

As long as we continue to trade above this key moving average support level, the intermediate-term outlook is bullish. Also, the primary (long-term) trend is higher as well.

Key intermediate-term levels to watch on the NASDAQ include support near 2500, and the 10-week moving average line near 2890.

On the S&P 500, keep an eye on resistance near 1400, and the 10-week moving average support line near 1327. 

 

Both of the key indices we track have recently confirmed a new bull market high. Our Dow Theory outlook has been updated with new potential intermediate-term support levels. These areas have been circled in blue.

The Dow Jones Industrial Average and the Dow Transports simultaneously confirmed new bull market highs recently, and key intermediate-term support levels have been updated accordingly. There are no other changes to our Dow Theory outlook, and we remain on a long-term buy signal. 

The Dollar Index moved sharply higher last week, rising about 2.6%. The benchmark index closed slightly below key resistance ($75).

While this is clearly positive for Dollar bulls, the index continues to trade below a declining 10-week moving average line. So, over the intermediate-term, it looks like the trend is still to the downside.

Although the short-term trend may be higher, the intermediate term trend is bearish. Also, the long-term trend is still negative, as we remain on a 10/40 week MA sell signal.

The next major support/resistance levels have been highlighted.

Follow our updates on Twitter and by RSS feed. For Facebook fans , we have a page as well. We also offer a morning e-mail update with all of our most recent content, available here. 

 

Is Another Market Breakout Imminent? (by Drew)

Hey Slopers, Drew here from PT with a new issue of the Weekly Market Digest. The NASDAQ Composite led the way to the upside last week as the benchmark index sprinted to a 2% gain.

We now sit just 20 points below a new 52-week high, and 40 points off the all significant 2007 prior bull market high.

For the month, the NASDAQ is currently higher by about 1.4%.

At this point, it looks like a resumption of the prior intermediate-term trend is all but guaranteed. The bulls made some serious progress last week, driving prices substantially higher in just four days with two runaway gaps.

Still though, our intermediate-term outlook for the market is overall unchanged because we continue to trade below key resistance near the mid-February peak on both of the indices that we track.

A clear breakout through this key resistance area would confirm the new uptrend. If the bulls manage to clear this level, there is a good chance we see even higher stock prices. However, we will remain patient and trade cautiously until we see a decisive breakout to new highs.

Looking at a chart of last week's price action, we can see that the bulls were in complete control of the underlying trend. We opened the week near the low end of the range, and finished the week near upper right edge of the chart.

Two key short-term support levels to watch based on last week's action include the top of Wednesday's gap (1319), and Thursday's gap (1333). 

In the prior Market Digest, I focused on a potential head and shoulders bottom (of the consolidation variety) that appeared to be forming on the charts of the key market indices.

"However, its worth mentioning that we may be in the process of forming a bullish head and shoulders bottom here, which has been outlined on the chart. If the bulls can hold on and defend Thursday's low near the 50-day MA support line (blue), we may have a right shoulder in place. A breakout from this range (and through the neckline of the H&S pattern) would confirm a new bull market high, and further upside from that point would be likely."

Last week, as the bulls managed to hold on to Thursday's low and subsequently drive prices higher, it became increasingly apparent that this pattern may be coming to fruition.

As Edwards and Magee explain in Technical Analyis of Stock Trends, "...one of these patterns which develops in a rising market will take the form of a Head and Shoulders Bottom. By the time these price formations are completed (left shoulder, head and right shoulder evident), there is no question as to their implications. But at the head stage, before the right shoulder is constructed, there may be considerable doubt as to what is really going on."

Now that we have a better idea of where the market stands, it is easy to setup a clear, actionable strategy for allocating capital. We know that this H&S pattern is only confirmed with a breakout through the neckline (red resistance line). So, once we have a new 52-week price high and confirmed market breakout, we know that the odds of upside follow-through are in our favor. 

"This is a long-term update, and we focus on the big picture. Is there any reason to think that this multi-year bull market is over? At this point, unlikely. Until we see the confirmation of a major intermediate-term lower low, or lower high, the long-term bull market remains in play.What are some of the key support levels that we would need to see taken out here? Well on the NASDAQ, this means a clear break below 2500, and on the S&P 500, we would need to see 1230 taken out".

It still appears as though the NASDAQ may be setting up for a key retest of the 2007 bull market high. On October 31st, 2007, the benchmark index hit 2861, a level that would ultimately serve as the peak of a five year bull market. A clean breakout through this highlighted resistance level would be an important psychological milestone for this bull market.

Last week, the NASDAQ and S&P 500 moved dramatically closer to new 52-week price highs, and a confirmed intermediate-term breakout.

At this point, the long-term trend is decisively to the upside, and the intermediate-term trend has dramatically improved after a 7-week correction. We are currently trading above the 10-week MA support line on both of the indices that we track, and prices sit near new bull market highs.

Key intermediate-term levels to watch on the NASDAQ include resistance at the 2007 bull market high (2860), support near 2500, and the 10-week moving average line near 2761.

On the S&P 500, keep an eye on resistance near 1350, and the 10-week moving average support line near 1316. 

 

Both of the key indices we track have recently confirmed a new bull market high. Our Dow Theory outlook has been updated with new potential intermediate-term support levels. These areas have been circled in blue.

The Dow Jones Industrial Average and the Dow Transports simultaneously confirmed new bull market highs recently, and key intermediate-term support levels have been updated accordingly. There are no other changes to our Dow Theory outlook, and we remain on a long-term buy signal. 

The Dollar plunged through support last week as the benchmark index fell about 1.1%, and confirmed a multi-year low.

At this point, the short/intermediate-term trend is still to the downside. The next major short/intermediate-term support levels to watch have been highlighted.

Also, the long-term trend is still bearish, as we remain on a 10/40 week MA sell signal. 

Follow our updates on Twitter and by RSS feed. For Facebook fans , we have a page as well. We also offer a morning e-mail update with all of our most recent content, available here. 

Quiet Week For Equities (by Drew)

Hey Slopers, Drew here from PT with a new issue of the Weekly Market Digest. Equity markets closed marginally lower last week on less than average volume.

This follows two straight weeks of advances, and a nearly 80 point rally on the S&P 500.

For now though, we continue to trade below key resistance near the mid-February peak.

As I mentioned in the prior weekly update, this is the key resistance area we want to watch over the intermediate-term. If the bulls manage to clear this level, there is a good chance we see even higher stock prices.

Until a clear breakout however, we will remain patient, and trade cautiously. There is a strong possibility that the bullish intermediate-term uptrend is still consolidating after recent gains.

Looking at the short-term S&P 500 chart, we can clearly see that there was no real winner last week. Although the benchmark index closed slightly lower, most of the trading activity occurred within a fairly narrow range.

Over the short-term, keep an eye on critical psychological support near 1295-1300 (S&P 500), this is a key area to watch. A downside breakout through this level would be a clear intermediate-term warning sign for the bulls.

Also, last week's high near 1340 is still a short-term resistance level to keep an eye on. 

Turning to the daily outlook, not much has changed since the prior update, and we are still trading within a short-term range.

I have highlighted this potential consolidation area on the following S&P 500 chart. A breakout from this range (red line resistance) would confirm a new bull market high, and further upside from that point would be likely. 

"This is a long-term update, and we focus on the big picture. Is there any reason to think that this multi-year bull market is over? At this point, unlikely. Until we see the confirmation of a major intermediate-term lower low, or lower high, the long-term bull market remains in play.What are some of the key support levels that we would need to see taken out here? Well on the NASDAQ, this means a clear break below 2500, and on the S&P 500, we would need to see 1230 taken out".

It still appears as though the NASDAQ may be setting up for a key retest of the 2007 bull market high. On October 31st, 2007, the benchmark index hit 2861, a level that would ultimately serve as the peak of a five year bull market. A clean breakout through this highlighted resistance level would be an important psychological milestone for this bull market.

Last week, the NASDAQ and S&P 500 both declined about .3%.

Volume ticked higher for the week on the S&P 500, but was flat on the NASDAQ Composite. Overall volume registered below average on both indices.

While the long-term trend is decisively to the upside, the intermediate-term trend is less clear. We are currently trading above the 10-week MA support line on both of the indices that we track, and near new bull market highs. But, as long as we trade within the highlighted consolidation range, the intermediate-term trend is neutral and we remain cautiously optimistic.

Key intermediate-term levels to watch on the NASDAQ include resistance at the 2007 bull market high (2860), support near 2500, and the 10-week moving average line near 2745.

On the S&P 500, keep an eye on resistance near 1350, and the 10-week moving average support line near 1310. 

 

Our Dow Theory outlook has been updated with new potential intermediate-term support levels. These areas have been circled in blue.

The Dow Jones Industrial Average and the Dow Transports simultaneously confirmed new bull market highs recently, and key intermediate-term support levels have been updated accordingly. There are no other changes to our Dow Theory outlook, and we remain on a long-term buy signal. 

The Dollar Index fell 1.3% last week, after slipping .5% two weeks ago.

The major target support area that we have projected for quite some time is finally within reach. While the short/intermediate-term trend is still to the downside, the Dollar has been ripping lower since the beginning of this year and may be slightly oversold.

At this point though, we would avoid trading against the trend. The long-term trend is still bearish, as we remain on a 10/40 week MA sell signal.

Follow our updates on Twitter and by RSS feed. For Facebook fans , we have a page as well. We also offer a morning e-mail update with all of our most recent content, available here. 

Stocks Up For Week, Approach Key Resistance (by Drew)

Hey Slopers, Drew here from PT with a new issue of the Weekly Market Digest. Stocks closed higher for the second week in a row, but still remain slightly below the prior bull market peak from mid-February.

This is the key resistance area we want to watch over the intermediate-term.

If the bulls manage to clear this level, there is a good chance we see even higher stock prices.

However, as I said in the last update, investors should still be patient here. The bullish intermediate-term uptrend may still be consolidating after a substantial multi-month rally, and it would probably be best to wait for the market to confirm new highs, or notch a major follow through day.

Last week, the bulls were in complete control of overall price action, as we closed the week near the high end of the trading range. Over the short-term, keep an eye on critical psychological support near 1295-1300 (S&P 500), this is a key area to watch. A downside breakout through this level would be a clear intermediate-term warning sign for the bulls.

Also, last week's high near 1338 is a short-term resistance level to keep an eye on, as well as support near Tuesday's low (1305). 

As I mentioned earlier, we are still trading within a short-term range, and I have highlighted this potential consolidation area on the following S&P 500 daily chart. A breakout from this range (red line resistance) would confirm a new bull market high, and further upside from that point would be likely.

Also on a positive note, it appears as though we have decisively moved back above key moving average support lines. So as the market moves higher, we will continue to keep an eye on the 20-day MA (1310), and 50-day MA (1300). 

"This is a long-term update, and we focus on the big picture. Is there any reason to think that this multi-year bull market is over? At this point, unlikely. Until we see the confirmation of a major intermediate-term lower low, or lower high, the long-term bull market remains in play.What are some of the key support levels that we would need to see taken out here? Well on the NASDAQ, this means a clear break below 2500, and on the S&P 500, we would need to see 1230 taken out".

It still appears as though the NASDAQ may be setting up for a key retest of the 2007 bull market high. On October 31st, 2007, the benchmark index hit 2861, a level that would ultimately serve as the peak of a five year bull market. A clean breakout through this highlighted resistance level would be an important psychological milestone for this bull market.

Last week, the NASDAQ added 1.7%, and the S&P 500 gained 1.4%. Volume ticked higher for the week on the NASDAQ, but declined on the S&P 500. Overall volume registered below average on both indices.

As I have said before, I remain cautiously optimistic on the general market until we see the decisive confirmation of a new bull market high, or a follow through day.

Key intermediate-term levels to watch on the NASDAQ include resistance at the 2007 bull market high (2860), support near 2500, and the 10-week moving average line near 2736.

On the S&P 500, keep an eye on resistance near 1350, and the 10-week moving average support line near 1305. 

 

The S&P 500 was virtually unchanged for the month of March as we formed a Dragonfly Doji candle, and prices slid just .1%.

The benchmark index closed well off the low end of the monthly trading range (75 points), so it was clearly a volatile month. For now, the long-term price trend is decisively higher, as we continue to trade well above the rising 12-month moving average support line. 

Our Dow Theory outlook has been updated with new potential intermediate-term support levels. These areas have been circled in blue.

The Dow Jones Industrial Average and the Dow Transports simultaneously confirmed new bull market highs recently, and key intermediate-term support levels have been updated accordingly. There are no other changes to our Dow Theory outlook, and we remain on a long-term buy signal. 

The Dollar Index slipped .5% last week, after rising .65% two weeks ago.

The next major support area to watch has been highlighted.

At this point, the long-term trend is still bearish, as we remain on a 10/40 week MA sell signal.

Follow our updates on Twitter and by RSS feed. For Facebook fans , we have a page as well. We also offer a morning e-mail update with all of our most recent content, available here. 

 

Stocks Bounce Back, But Is The Bottom In? (by Drew)

Hey Slopers, Drew here from PT with a new issue of the Weekly Market Digest. Was last week's high volume sell off a capitulation bottom?

Well, stocks bounced back in stunning fashion as investors shrugged off the events in Japan, and the unfolding crisis in the middle east.

The NASDAQ soared, rising nearly 3.8% for the week.

For the month of March, the S&P 500 is currently lower by about 1%, and the NASDAQ is down roughly 1.4%.

In the prior update, I stated that there was a decent probability that the markets had entered a corrective phase. I think that at this point, even after last week's bounce, this may still be the case. Until the markets confirm a new intermediate-term high, or we see a major follow through day, I think it would be wise to tread carefully.

Here are a few short-term support/resistance levels to watch based on last week's price action. First, the 1300 support area is undoubtedly a key level to watch. Also, keep an eye on Wednesday's low near 1285.

Friday's peak near 1320 may serve as a potential resistance level, and this area also corresponds to the apex of the triangle you can see on the following daily chart. 

 Last week, the S&P 500 reclaimed two key intermediate-term support levels, the 20 and 50 day moving average lines. While this is a positive first step for the bulls, it does not necessarily mean that we should run out and aggressively buy equities.

The benchmark S&P 500 index is once again sitting within a multi-month trading range (highlighted). Lets see if the bulls are strong enough to challenge the resistance level of this range before we dive head first into the market.

Generally, I would give the underlying intermediate-term uptrend the benefit of the doubt. But, the fact that we violently broke a number of key support levels last week has me concerned. Potentially, this weakness may foreshadow a much larger decline in the coming weeks/months.

While I am certainly open to the possibility that the bottom is in, the reward to risk ratio of chasing this market is less than ideal.

So, we will be patient here while the markets bounce around, and once the direction of the underlying trend is clear, we will allocate more capital. 

As I said in the prior market digest, "this is a long-term update, and we focus on the big picture.

Is there any reason to think that this multi-year bull market is over? At this point, unlikely. Until we see the confirmation of a major intermediate-term lower low, or lower high, the long-term bull market remains in play.

What are some of the key support levels that we would need to see taken out here? Well on the NASDAQ, this means a clear break below 2500, and on the S&P 500, we would need to see 1230 taken out".

It still appears as though the NASDAQ may be setting up for a key retest of the 2007 bull market high. On October 31st, 2007, the benchmark index hit 2861, a level that would ultimately serve as the peak of a five year bull market. A clean breakout through this highlighted resistance level would be an important psychological milestone for this bull market.

Key intermediate-term levels to watch on the NASDAQ include resistance at the 2007 bull market high (2860), support near 2500, and the 10-week moving average line near 2725.

On the S&P 500, keep an eye on resistance near 1350, and the 10-week moving average support line near 1300. 

 

Our Dow Theory outlook has been updated with new potential intermediate-term support levels. These areas have been circled in blue.

The Dow Jones Industrial Average and the Dow Transports simultaneously confirmed new bull market highs recently, and key intermediate-term support levels have been updated accordingly. There are no other changes to our Dow Theory outlook, and we remain on a long-term buy signal.

The Dollar Index added .65% last week, after a 1.4% decline two weeks ago.

The next major support area to watch has been highlighted.

At this point, the long-term trend is still bearish, as we remain on a 10/40 week MA sell signal.

Follow our updates on Twitter and by RSS feed. For Facebook fans , we have a page as well. We also offer a morning e-mail update with all of our most recent content, available here.