Another new leg up to above the all-time highs of 2134 for the SP500

Since the last post where I was expecting an important medium term bottom, the SP500 has since rallied 16%. I did commented in March 23rd to anticipate a 3 to 5% pullback... that didn't happen until a month later. So now that a 3% correction has occurred the market condition is setup now for another new leg higher. Looking for a rally to new all-time highs in the coming months.

At extreme medium term oversold, expecting this week is THE bottom.

From last post, the SP500 dropped another 5% before hitting 'A' bottom. But the rally up was only back to the level when I wrote the post. The global fears of the oil plunge and of the China slowdown sent the global stock markets in heavy selling since the beginning of the year. Looking at charts of the major indexes and technical indicators, there are hints of a bullish double bottom patterns developing and positive divergences. I believe 'THE' bottom is in this week for the global stock markets or at least a 10% rally from here.

Global fears pulls the stock market down to medium term oversold

From the last post, the set up was to look for one more move down before reaching an important bottom and rally to new highs. That didn't happen as fears of a China slowdown, plunge in oil prices, and the Middle East crisis have the global stock market selling sharply down. The move down has been much more than anticipated and is much concern than before about the health on the long term bull market. Looking at the first chart below the SP500 is now closing in on its fall season lows. As at the fall season lows, the stock market is at medium term oversold and I am anticipated at least so sort of +5% rally to occur soon.

The above chart I have label three lows for the SP500 with the current low at label #3. At the bottom chart below is the SP500 back in the year 2011. As the charts below illustrate, there is some similarity between the price patterns. I anticipate the labels 1, 2, and 3 on both charts is hinting to me that the SP500 is currently setting up to rally higher in the coming months.

This week... rallied off short term oversold, at meditm term oversold, and Fed to hike interest rate

Was hoping to get this post out on Monday but wanted to wait until the Fed meeting to raise interest rate today. Anyway, since the last post, the stock market formed the pattern I was looking for... just not exactly what I was looking for. I was looking for a brief move down first but that didn't happen as the market bottomed and the rally back up was higher than anticipated. Monday the stock market was short term oversold so I was anticipating a brief rally early this week. Medium term, approaching oversold but would like to see more oversold in the stock market to get a solid buy signal. So even though stock market could be at short and medium term oversold buy signals I wouldn't be surprised in the next few days the market will move back down below Monday's lows before making the final bottom. From there the stock market should attempt to rally big back above the highs set this year. For the Dow, SP500, and Nasdaq, rallies to new all-times highs.

Short term oversold but medium term oversold weeks away...

From the last post, the SP500 did rallied another +2% before turning down. The rally high of 2116 didn't quite make it back toward the all-time but it did make it back above the breakdown point in mid August. Being short term oversold, will expect the stock market to attempt a short term rally by mid week after some brief selling Monday and Tuesday. The chart illustrated below shows the SP500 broke out of a Double Bottom pattern in early October and reached around its upside breakout target at the beginning of November. I anticipate a similar but smaller Double Bottom pattern could be forming in the coming weeks. The middle section of the rally should run into resistance and selling near the 200 day moving average (currently at 2007) and then a retest of this week's low to be follow. By that time, the stock market should be approaching medium term oversold and a setup for another move higher. I will update back in a several weeks on how this stock market scenario is play out.

Nice month long rally but at short and medium term overbought now

From the last post, I hinted that the major indexes should be back toward their summer highs within 6 to 12 months. Since then the indexes formed what is called a bullish "Double Bottom" pattern and broke above it early this month October. Going forward, I believe there will be a pause and likely correction back down a bit in the coming weeks. There could still be another 2% or so upside but I believe major indexes will give back about half the move up since early October. That put the support range at the 1975 to 2000 level for the SP500. From the stock market should found a bottom a move forward back above the summer highs.

Worst drop since June 2011 and one of the worst 6 day drop

The last two posts I cautioned about a narrowing price range and internal weakness but the last post I was anticipating a resolution with a break out of the narrow price range would be... with caution... to the upside mainly due to the positive price reversal back up on August 12. Wow, was I really wrong on that one. The break out turned out to be to the downside... -11% in 6 days... one of the worst on record. The largest was -21% back in October 2008. With the SP500 closing below its 200 day moving average, it closed as the 3rd longest streak, 3.8 years above it 200DMA, before closing below it on Monday. The longest being 7 years from October 1990 to October 1997. So what now? Obviously, the stock market is extremely oversold on the short and medium term basis. Majority of my medium term readings are extremely oversold but several important momentum readings are now only crossing over between neutral and oversold... due to the nature of the narrow price range of the past 6+ months. Another question to ask is are we heading to a bear market? I don't think so. I believe we are only in a +10% correction mode which happens to correlate with the 200DMA record I mention above. With the 10% correction occurring on Monday it marked the 3rd longest streak without a 10% correction. I believe we are still in a bull market and while the stock market may still probe several percentages lower in the coming weeks I believe 6 to 12 months from now the stock market will attempt to break out above its all-time highs of this month.

Short term signals have worked well recently... we got oversold and a bounce yesterday.

The major indexes have been in a very tight narrow trading range this year. Rarely getting close to medium term overbought or oversold but the short term signals have been very reliable as the major indexes reacted to them very well. Yesterday, the stock market did reach short term oversold during mid day and rallied back up. Going forward the stock market have been in a long consolidation with internal weakness underneath. Eventually this should result in the major indexes breaking down hard or breaking up strongly. I believe we will eventually break higher. Whether this short term rally will be the start we'll see.

Caution ahead as stock participation gets narrower and narrower

After the last post, the stock market had several up and down moves each lasting over a week. The last low at early July the stock market got near but not at medium term oversold. This resulted in a week long rally before pulling back about 1% for the SP500 this week. But broad stock participation has gotten narrower and narrower on each leg higher as the indexes are being pulled up by the big cap stocks. On a medium term time frame this usually result a +5% correction. Just when the correct will occur is unsure as the narrow stock market rally led by the major indexes could continue on for weeks or months. For the time being if one is still participating in the stock market , it's better to lightening up on small or individual stocks and concentrate on the major index ETFs. On the chart illustrated below, looking for the SP500 to hold at the black line support level to remain bullish. A break below the support line should result in more downside for the short term.

Back to uptrend support line... as stock market in a slow grinding move up

From last post, the SP500 didn't quite move down to the 2060 level or lower. Instead it got down to 2068 and then turned back up and did set a new all time high of 2134. During that time, much of the individual stocks were consolidating their moves instead of joining the major indexes higher. That hinted the upside was limited... and as such the major indexes have moved down this past week while much of the individual stocks continued to consolidate at current price levels. This also could hint the downside is limited. As the chart illustrated below, the SP500 is back down to an uptrend support line. If the stock market can hold at current levels then another rally back higher could be in the cards. But if the support level is breached then the upside trend could be broken for more consolidation or downside for the short term.

Looks like setting up for lower prices and medium term bottom later this month

From the last post, the stock market did moved up slowly but turned down by late April. Did reach near short term oversold last week but the two day rally that followed was brief and I see the trend to continue down for the coming weeks due to internal weakness (individual stocks being weaker than the major indexes.) As the chart illustrates, I will look for the SP500 to fall toward to the 2060 or lower levels before we see a medium term bottom setup for a rally back above the all-time high level of 2125.

Followup of last post... short term movements turning bullish

After the last post, the major indexes did turned down about 2% before reaching near (but not at) short term oversold levels and then bounced back a bit before turning back down back near the 2% correction. The small cap indexes, as shown in the 2nd chart, have held up better and are actually near their all-time highs at the moment. On the medium term levels, the major indexes went down as far as between neutral and oversold while the small cap indexes corrected down toward neutral. So no medium term signals but the past month action of consolidation hints to me of a slow move higher led by the small caps.

At medium term crossroads... market at overbought

Have been busy since my last post back in early October last year. As the chart below shows, there were two 'minor' medium term signals around Nov./Dec. and January. The stock market is still higher than my last call for a medium term rally in early October. Right now we are close to or at medium term overbought and would expect mostly weakness in the individual stocks in the coming weeks. The major indexes (Dow, SP500, Nasdaq, Nasdaq 100) could follow along with weakness too or they could continue to slowly grind higher for several more weeks before turning sharply down. Good time to start placing sell stop orders or/and shift to selling individual stocks into small positions in the major index ETFs if one decides to take the risk for more upside.

Medium term buy signal made this past week

Have not posted for a several months... busy, lazy, or just waiting for the 200 day moving average to be touched which I probably should not had concentrated too much on this summer. Because of the fear that the SP500 and the stock market will get a steep sell off toward the 200 DMAs had prevented me from being fully invested in the last medium term buy signal in early August. So I'm ignoring the 200 DMA for now this time as there is another buy signal made this past week. There could be one more retest down toward today's low in a week or two... or this could be THE bottom. Either way, coming out of October I expect the stock market to rally for the rest of the 4th quarter to new record highs in the SP500.

Got the break higher... now at medium term overbought and a record broken concerning the 200 DMA

Since the last post, the stock market shot up higher after consolidating for several weeks. The break above SP500 1900 was finally completed and the indexes had a nice week long rally. I thought the move higher could be done early last week but then on that Thursday started another move higher for three more days before pausing or pulling back slightly. So this week my indicators are now at short and medium term overbought thus this warrant caution at minimum as individual stocks could be hit with some selling before the indexes. Now comes the new record concerning the SP500 200 day moving average. Going back the past +25 years, the longest the SP500 have been above its 200 DMA without retouching it has been 18.5 months. Currently it's about a week away from 19 months and the SP500 is still +7% above the 200 DMA at 1808. Is it different this time? In Wall Street, that's a dangerous question to ask. Stock market appears resilient and the truth is we are still in a long term secular bull market. But eventually I believe the SP500 will meet the 200 DMA some where between current level of mid 1900s to the lower level of the 1850s.

At narrow trading range while waiting for the 200 DMA to catch up but main risk is still to the downside

As the title of this post states, the stock market in the last several weeks have been going in short moves up and down slowly waiting for the 200 DMA to catch up. I'm guessing the SP500 could make a sharp quick move down once the 200 DMA moves up toward the 1800-1825 level. The Dow and NYSE Composite, like the SP500, have been moving in rising trading ranges.

Unfortunately for the Nasdaq, Nasdaq 100, and Russell 2000, they have been moving in declining trading ranges. The Russell 2000 index has already touched its 200 DMA in mid April while the Nasdaq indexes came close but no cigar.

The Nasdaq and Nasdaq 100 are in a potential technical pattern whereas a break out of the trend lines will be a false one as it reversal back into the opposite direction. I anticipating this would be a false breakout higher (to go along with the SP500 making an initial break above 1900) and then a reversal back down for an eventual retouching the  200 DMA.

Struggling to stay afloat for the coming month.

From the last post I gave while I was on a spring break vacation I noted a rally was overdue due to oversold readings. Got a week long rally but then the market turned back down the last several days. The stock market is using the Ukaine crisis as an excuse for most of the selling. The real issue should be that the SP500 has now gone 17+ months since it last touched its 200 day moving average (the longest in the last 25+ years being 19 months in 1996.) So I could see some consolidation or more likely... weakness in the coming month as the SP500 is still about +5% above its 200 DMA.

At very short term oversold again

I'm on vacation right now so this post will be short. Like the last post, I'm looking for a rally here due to very oversold readings for the short term. The stock market didn't quite reach the downside target nor the upside target I was looking for in my last post and the follow-up comment. Maybe this is what I am anticipating from the last post.

Short term oversold that's setting up a strong short term rally but may need one more day of scary sell-off

From the last post I stated a short term overbought should last a few more weeks before running into a pause or consolidation. We got that in early March where individual stocks, especially speculative momentum stocks, started to sell-off. I followed up with a comment to the last post of a possible brief rally of the stock market with the SP500 rallying back toward the 1870-1880 level. Was unsure whether the SP500 would continue higher from there or would come back down. Well, from the past week the Nasdaq, Nasdaq 100, and Russell 2000 had sold off quite a bit. The other major indexes... Dow, SP500, and NY Composite had held up better. With the weakness from the last three weeks the stock market is now at short term oversold levels though not at medium term oversold yet. But I still see the stock market could drop a bit more before turning higher again. If there is further brief weakness than I'm looking at the SP500 1830-1835 level to eventually see a short term rally to develop that could eventually lead to a break above 1880 and higher. Looking ahead that could get the investors excited as the SP500 finally rallies toward 1900+ after having failed to hold at 1880 this month, March. But a rally above 1900+ could be short term lived as the SP500 and stock market should make likely break back lower with a sharp quick sell-off to eventually retouched its 200 day moving average, which by then should be moving slowly higher toward the 1800+ level.

Short term overbought last week - next 3 months could be range bound consolidation

From the last post I hinted the stock market could start to rally soon. But the following week there was an one day 2% sell-off before the rally I was looking for finally happened. I also followed up in the comment section of the post that a medium term oversold bullish setup could be occurring too. So since then the stock market has gotten an impressive two week rally especially the Nasdaq. But the medium term indicators has gotten close to overbought for the New York Stock Exchange while the Nasdaq exchange is between neutral and overbought. So caution is warranted here.

As current, the stock market is short term overbought. I would think this occurrence would be like the same situations of the past 6 months... grind a little higher before stalling on the 3rd or 4th week. The problem, which I been stating for the past few months, is the 200 day moving average is going need to be retouched which this hasn't happen yet since 15 months ago. In my Nov. 13, 2013 post I looked back the last 30+ years of the SP500 going beyond 12+ months without retouching its 200 DMA and most went up to 15 months before getting a quick sell-off back down. I also illustrated in the 1996 chart it went up to 18+ months before selling off over 8% intraday before recovering back higher.

So whether the stock market can continues to grind slower higher, any move higher will be temporary as a quick move down is expected and any move lower will also be temporary. I expect to see range bound consolidation for the next few months. Risk has risen and I had reduced my positions to less than 50% and into less volatile stocks. Will continue to reduce positions and go into short term and day trade modes if risk continues to rise. I anticipate the stock market will eventually move higher at the 2nd half of the year.