RUT Levels

After a six day run up, the RUT stalled just under 800 and fell back below the descending trendline on Thursday. We'll have to wait for today's close to give us the next clue on the probable direction.

RUT Daily:

RUT Gets Excited

The RUT has made a mad dash to resent resistance levels and hasn't spent any time at those levels -- it just continues to move up unencumbered by the the 770 and 780 resistance. Next stop 800?

The current 5 day uptrend has shot up at an 83% angle which historically has been unsustainable. I'll be looking for a retest of 800, but the probabilities and recent chart action points to a potentially large pull back in this area. I'll wait to see what the price does this week and trade the charts.

Important to note that the RUT has only spent one day above 800 in the last 7 weeks. For the RUT to clear and hold 800 without a pull back seems like a low probability, but it could happen and really surprise the bears, we'll see.

RUT Daily Chart

QQQQ at 1 Year Trendline Support

The QQQQ feel to a 161.8% retracement level today that is also close to the 1 Year Uptrend Line. This move down was proceeded by a bearish wedge pattern on the daily Chart. This level has held with the exception of the Aug fall where it spent just 2 days below this area.

Tomorrow's earnings reports may be the deciding factor on whether this support area holds or not.

As of last Friday, the QQQQ was attempting to put in a higher low, but those dreams were wiped out today. With the break of that level, the intermediate bias is neutral based on the last 3 months of price action. I'll be watching that trendline very carefully.

QQQQ Daily Chart

NDX: Can it be Saddled?

The NDX continues to be a bucking bronco and daily chart is becoming tougher to find sensible patterns to trade. To simplify the pattern I've posted a line chart to smooth out the price action.

For the bull arguement the NDX is putting in some higher highs and higher lows, but for the bears it's also showing a head and shoulders type pattern forming that if confirmed with a lower close tomorrow might negate the higher lows. Tomorrow will be an important day to add the next piece to this puzzle.

NDX Daily Line Chart:



NDX Daily Candle Chart:



NDX 1 Year Daily Chart, The Bigger Picture

NDX: What a 5m Chart "Smack Down" Looks Like

This chart is a good example of why you would want to think twice about going long before a Fed Announcement:

NDX 5m Smack Down:

SPX: 61.8% Fib Target in the Crosshairs

Despite the beating the SPX received on Fed day, the SPX daily chart is indicating the possibility of a higher low (with a higher close to confirm tomorrow), and an upward target has been created with the convergence of the 61.8% fib, the downward trendline and the upward trendline.

This intersection should act as a magnet for price action since the lows of 1470 (38.2% Fib) were tested and held. If the SPX can open and hold above the 50% 1490, then the next probable target to the upside would be 1511. With the volatility in the market this level could easily be reached by tomorrow or Friday if the market is able to get some good news as a catalyst.

SPX Daily Chart:

DOW Confirming a Higher Low

The DOW candle closed above the body of yesterday's bottoming candle to confirm the possibility of a short term reversal to the upside. The DOW is still within it's upward trend channel that formed at it's low in late November.

There will be resistance in the 13,700 area so keep and eye on that area. To the downside there should be some support in the 13,300 area.

If the DOW can't break above the 13,700 level it may chop sideways for a while. So far, the nice bounce we saw indicates that there is still some life in the DOW despite the economic fears that abound in the news lately.

DOW Daily Chart:

RUT and The Tale of Failed Bottoming Tail Candles

Looking at the RUT chart today I was amazed to find that the last 6 bottoming tail candles on the daily chart all failed. This is not to say that the bottoming tail the RUT formed today will fail, but be aware that to confirm a bottoming tail candle, the following day's body must close above the body of the bottoming tail candle.

(A bottoming tail candle could be defined as a candle with a long bottom shadow that is at least 3 times the length of the body.)

Overall the RUT has been very choppy with the Real Estate Sector volatility adding to the vulnerability of the small caps. The RUT intermediate trend is still down with lower highs and lower lows over the last 9 weeks.

The RUT is attempting to rally, but hit resistance at the 50% fib where it also intersected with the descending trendline.

We'll be watching to see if the RUT can finally confirm a short term reversal which would help to form a higher low. If we close lower tomorrow it will create a better case for the bears and may hint to a retest of the 735 lows.

RUT Daily Chart:

REJECTED!

The Fed came through with exactly what the market expected (.25 cut) and then the selling began and didn't stop until the bell rang.

Looking at the chart it all makes technical sense. The 50% fib level and descending trendline intersected and ended up acting as some resistance.

Now back in the range seems likely to chop between 800 and 735 for a few weeks, we'll see.

RUT Daily Chart:

DOW: Buy the Dips!

Looking at the DOW chart there are tow snippets that come to mind:

1. Buy on dips
2. When the sky is falling the market has a tendency to climb that wall of worry

The latest rally has climbed at a 73% angle, even stepper in the last few days. There will likely be a pull back this week, but when and how deep will only be told by the price action.

DOW Daily Chart:

NDX Levels

The NDX like the other index charts is running up to resistance levels that technically look pretty convincing. However, only the price action can lead us to a conclusion of which way it will actually go.

On Oct. 31st with the news of the rate cut, many got what they thought was the green light to put on bullish trades only to be sadly disappointed the following day when the big November fall was initiated. Tomorrow and Wednesday will likely be another mind game where the obvious may or may-not be the direction the market decides to head.

Arguments on the charts can be made for both camps so we're in the same position again where we'll just have to wait and see.

NDX Daily Chart:

SPX - Strong Price Action

The SPX has shown some incredible resilience over the last few weeks and is currently holding those levels. The SPX is about to bump into another descending trendline and has made this move with the price moving up at a 64% angle (very straight up) -- this angle is likely unsustainable so I'll be watching for a break of the Green Trendline for the signal of a possible pull back.

SPX Daily Chart:

RUT Downtrend Broken on Daily

I re-drew my trendlines today on the RUT and the descending trendline is holding as a resistance level. The 50% fib level also acted as resistance. Tomorrow's Fed announcement will likely push the RUT convincingly to one side or the other.

Of note was the strong move down on the RUT the day after the Oct 31st. announcement. Keep your eyes on the price action will probably get volatile again in both directions
as the bulls and bears hash it out.

RUT Daily Chart:

RUT Resistance

The RUT is hitting it's head on overhead descending trendline resistance so far this session. We'll see if the pull back continues throughout the day.

RUT Daily Chart:

Homebuilder Index Breakout

Last week we posted a chart showing the potential for a relief bounce in the homebuilders sector index. The break of the descending trendline was confirmed today.

If this index can sustain the gains, it should help the RUT regain it's strength. The DJ Homebuilders Index was up 13% today, the PHLX was up over 8% -- HUGE!

$HGX Homebuilder Index:

Leading Up to the Fed

Well, the price action can only be viewed as positive when you look at the price charts. Plenty of positive price action in the last 8 sessions. This is similar price action that we saw in last few weeks of October before the last Fed announcement. Just a reminder that the day following the last Fed rate cut, the market sold off hard in what could be described as "buying the rumor and selling the news." We'll just have to wait and see, but be prepared for either direction.

The SPX daily seems to have formed an inverted head and shoulders pattern that confirmed today with a break of the neckline. There is overhead resistance near 1520 at the descending trendline. The market may chop the next few days before the Fed.

SPX Daily Chart:

SPX Nears 50% Retracement

Like the DOW, the SPX is close to reaching the 50% retracement level of the 2 month move down. This 4 day really has been uncontested (no pull back days), making the potential for a pull back this week a definite possibility.

There are a few things the bulls have going for them this week:
1 - Just in time for a Santa Claus rally
2 - Left over euphoria about a potential .50 Fed rate cut
3 - Banks and Broker Dealers seem to have bottomed

However, the bears can't be counted out because...
1 - The economy is still weak
2 - Subprime exposure is still not 100% defined
3 - 1490 is a horizontal resistance area
4 - After 4 straight days up, there is potential for a pull back to retest support

SPX Daily Chart:

RUT and 770 Resistance Area

The RUT rallied with the rest of the market on Tuesday and Wednesday, but found resistance on Thursday at 770. On Friday the RUT gapped all the way up to 780, but spent the rest of the day fading and ended up closing below the 770 area at 767.77

Although the RUT has technically broke the recent downtrend (red dotted line) on the daily chart, the 45 point move from 735 to 780 seems "extreme" and maybe more of a relief bounce then a reversal.

Friday's price action created a topping tail candle at the 770 resistance level and provides a clue that new buyers have not yet materializes above 770. Should the RUT continue to fall on Monday there should be support levels at 762.50, 757.50 and 751.50

A possible key to the RUT's direction may be in the Homebuilder's index. The weakness in this sector over the past few months have helped to drag the RUT down, but the Homebuilders may be trying to hammer out a bottom near 5 yr lows. If the homebuilders can get a similar relief bounce up, it could easily pull the RUT up and over the 770 area. If the homebuilders continue to weaken the RUT will likely have trouble as well.

RUT Daily Chart:



Homebuilder's Index ($HGX) 5 Year / Weekly:



Homebuilder's Index ($HGX) 1 Year / Daily:

DOW Hits 50% Fib Retracement

Last night on our call we revisited the potential of DOW reaching the 50% tracement level on some more strength. The index hit that area and it acted as resistance intraday. With 4 straight days up to the 50% retracement area, the chance for a pull back is becoming greater.

DOW Daily Chart:

DOW 1 year / Daily Chart

DOW 1 Year Daily Chart:

SPX 1 Year / Daily Chart

Below is a 1 year daily chart of the SPX

SPX 1 Year / Daily Chart:

RUT 2 Year Chart

The RUT found a support bounce near the August lows and is trying to inch it's way back up. The RUT is currently just above the 23.6% fib retracement area while the NDX has already climbed to the 50% area. This price action to me shows the relative weakness of the RUT index. Notice too that the RUT has convincingly broken it's uptrend and continues to show weakness. In order to reach the previous highs in the 855 area it will need to retest the back of the upward trendline as well as break through several horizontal resistance areas. The probabilities favor more sideways movement between 735 and 800 in the near term. I've listed a hypothetical unbalanced Iron Condor to give an example of a trade that would offer a good risk reward and limit downside risk. This trade example is for educational purposes only.


RUT 2 Year Chart:

NDX 2 Year Daily Channel

The NDX once again is showing it's strength and bounced off channel line support. More importantly is that it's cleared and is currently holding above 2050 which had a lot of congestion.

NDX 2 Year Daily Chart (ascending channel still intact)




Below you'll see a 60 Minute Chart that better illustrates the trend break and corresponding "raising window" created by the gap up Wednesday morning.

NDX 30 Day / 60m Chart:

Market Bounces

Earlier this week I posted a 60 Chart of the SPX showing a bullish falling wedge pattern forming. It confirmed a break to the upside this morning and hit our fib target this afternoon.

SPX 60 Minute Chart:

Dow Levels

Below is a 2 Year / Weekly Chart of the DOW showing a support bounce last week at the 12,750 level. This area has both horizontal and trendline support. If the DOW continues to move up next week, 13,500 will be a likely resistance area as it was a previous support level.

DOW Weekly Chart:



The Daily support shows the bounce on Friday more clearly. I've drawn Fibs at Friday's low to show retracement targets. If this market decides to get the Christmas Spirit and incite a Santa Claus rally the DOW could easily retrace to the 50% 13,500 level.

DOW Daily Chart:

NDX Levels

I posted an 8 Year / Weekly Chart to get a better perspective on the NDX in relation to it's past pricing action. From this perspective although the index looks like it's trying to put in a bottom, it also looks "heavy" like it wants to retest the 1960 area as some point in the next few weeks. On the weekly it's over extended from the longer term channel and with the bearish tone in the market, some more panic selling could drop it "down to" or "back in" the channel. A bullish Santa Claus rally could head back up to test the 2100 area.

NDX 8 Year / Weekly Chart:



I'll be paying close attention to the green uptrend line drawn from Nov 13 through Friday and will turn pretty bearish short term if it closes another day below that line.

NDX 1 Year / Daily Chart:



The NDX 15m Chart has been consolidating into a pennant formation. We'll have to see what price action Monday brings and to see if it's able to break out to either the top or bottom. Top resistance target should be 2080 and bottom support should be 1980.

NDX 20 Day / 15 Minute Chart:

SPX Levels

Looking at the SPX weekly, it found some support last week in the 1420 area and got a little bounce on Friday. The chart is showing some potential secondary support in the 1390 area where it has both Fib and trendline support. Resistance on the weekly looks to be in the 1480 area.

SPX 5 Year / Weekly Chart:



The SPX is forming a Falling Wedge Pattern on the 60 Minute Chart which has a bullish bias. If the SPX is able to break out of the wedge to the upside, one might look for it to fist clear the 1450 area and head to the next fib level of 1468. It will likely resist at 1470.

SPX 60 Minute Chart:

RUT Levels

On Friday, the RUT broke out of a 6 day downtrend channel to the upside and hit resistance at the 760 area to close at 755. The next upside target once it gets over 760 would be 765 where it will hit both horizontal resistance and the 50% fib level. To the downside, there should be some support at 750 and if it breaks below 750 then 745 may be the first pause before it tests the lows again 737.

RUT 20 Day / 15 Minute Chart:



On the 5 year Weekly chart the RUT has broken the long standing upward channel and is now forming a downward channel on the Weekly Chart. Last week formed a bottoming tail (bullish) on the Weekly chart, but we'll have to see if this weeks price action confirms to the upside. On the weekly chart my upside uber-bullish target would be 800 and my downside uber-bearish target would be 725. On Friday the rally in Homebuilders is what gave the big boost to RUT. The homebuilders were in an extremely oversold area as seen here in this chart. Below you can see that the RUT is near the bottom end of the downward channel and is also in an fairly oversold area.

RUT 5 Year / Weekly Chart:

Homebuilders Support Levels

The Homebuilders Index is starting to show a potential bounce to the upside on both the 2 year channel and 6 month channel. This could help to strengthen the RUT in near term if price continues to increase over the next few sessions. Note on the chart how the channels have held very well.

Dow Jones Homebuilders Index: 2yr / Daily Chart

Banking Index Finding Support on 2003 Lows

The banking index has made a free fall in the last few months that is attempting to find support near the lows of 2003 on the 5yr chart. There can certainly be more movement down, but I'm going to keep my eyes on the possibility of a relief bounce in the near term as the RSI is bottoming out and the weekly chart is starting to form a bottoming tail.

S&P500 Banking Index 5 yr / Weekly Chart:

Broker Dealer Index Looking for Fib Support

The Broker Dealer Index is trying to find support at the August lows. This screenshot taken midday on Wednesday. We'll see how the daily candle closes to give us a better idea of next direction. Broker Dealers are a heavy component of the S&P500 so it can be a good indicator of the SPX direction.

Broker Dealer Index 1yr / Daily:

SOX Still Weak

The Semiconductor index has started another leg down as it broke longer term fib support today.

SOX 2 Year Chart

SPX 30m Chart

On Tuesday the SPX rallied back to the descending trendline on the intraday charts, and the following morning it broke above but then hit some solid resistance at 1490. Wednesday closed near 1470. Thursday opened lower on a gap down and stayed under the descending trendline for the rest of the week. One could argue that it's put in a higher low at 1445, but on the daily and weekly charts, the SPX is looking more bearish then bullish.

SPX Intraday Chart:

SPX Rally to Resistance

The surprise rally today marched back up to the 100% fib retracement on the 3 day daily chart where it intersected with the descending trendline that starts on October 31st.

It will be interesting to watch tomorrow to see how it reacts to that potentially strong resistance. Anytime when multiple support or resistance levels intersect, they become stronger. We'll see if the market agrees.

SPX Daily Chart:

Friday: Late Afternoon Jitters

The Friday trading session was quite tame and even a tinge bullish up until the last 30 minutes when a flurry of selling took down the NDX down to new lows. The SPX and DOW followed suit and also closed near the lows of the day. Amazingly, the RUT held up much better then the others and closed smack in the middle of the days trading range.

Also of note, while the NDX continued the sell off into the last minute of the session, all the others got a little relief bounce in the last 5 minutes.

With that action, the NDX formed a "shaved bottom" daily candle which suggests there could be continued selling on Monday morning. Important also to note that NDX did NOT hold support at 2050 and closed at 2034 - The 2000 area seems the next likely level to stall or find support.

NDX Daily Chart:

NDX Daily Chart: Pull Back to 100% Fib Level

The NDX gapped down on the opening this morning, and so far has found support at the 100% fib line. With such a fast move down, a relief bounce may be right around the corner. If not, the next fib support is at the 2000 level.

NDX Daily Chart

Banking Index Puts in a Bottom?

The S&P Banking Index created a bottoming tail candle today on the Daily Charts at 161.8% fib support. We will need to watch tomorrows close to confirm this possible reversal signal. If we do reverse over the next couple of days, watch carefully as the descending trendline may act as resistance as the banks try to turn things around. The banks may need to create a double bottom before a sustained rally can develop.

S&P Banking Index: 1 Year / Daily



S&P Banking Index: 10 Year / Monthly

Internet Index Loses Steam at 261.8%

The Internet Index has been on a tear since early September and we noted on are call about 6 weeks ago that it had approached the 100% retracement level. I thought that it might find that as resistance, but it didn't and continued it's rally to the 161.8% area, paused for 2 days and then made an ascent to the 261.8% fueled by strong Google earnings.

The pull back from the 261.8% started innocently on Wednesday and had a mild pull back to 530 and bounced. Today it continued but in the process it destroyed the primary upward trendline that had held so well over the 2 month rally. Although it bounced a bit today, the break of the trendline was severe, and it's been my experience that when a primary trendline is broken, the next extended move is a retest of the secondary trendline which in this case quite a ways down. This retest may take months to develop, but do keep an eye on this index as it's been the major component to fuel the NDX over the last few months.

The key area to watch now is the primary trendline (green dotted line) to see if the index can pop back above and continue it's ascent on the 423.6% level. A more likely scenario would be to kiss the bottom of that trendline and consolidate for a while as it digest the parabolic move up over the last 3 months. The price action will tell so keep your eyes on the chart.

Internet Index 3 Month / Daily Chart

NDX 2 Day / 15m Chart

Note the fib levels on the close today and the interesting price action in the last 15 minutes as it fell from the 38.2% back down to 23.6% support.

Looking forward to tomorrow, a likely range would be between 0% $2066 and 50% $2145.

The black dotted line you see between those 2 levels is the bottom of the sideways channel it's been in for the last month or so. It peeked it's head above it, but fell below in that last 15 minutes.

NDX 2 Day / 15m Chart: