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: