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SPY:   SPY gapped lower this morning and never looked back and trended lower all day till it bounced off its lows at 154.28.  This have been support we had mention a few times, it is the middle of this range that SPY has been trending in.  The close above this level again shows how important it is. Short-term SPY is experiencing resistance right at 155.39, as this level capped the rally off the low today.  If SPY can get above this, there is a chance for further upside at least to the opening levels from today around 156.32.  We have hit the 3% drop the topically occurs with a overbought Piker Signal so we need to watch levels to determine if we will get a bounce or more downside till there is an oversold condition.

Below 154.28 is bearish, above 156.32 things get a little bullish and the key level is 153.39.

Chart Review SPY, QQQ, DIA

QQQ:   QQQ were affected by AAPL’s sell off and unlike SPY the QQQ failed to get above  key support at 68.30 (first light blue line).  In fact this level acted as resistance and now provides us with a key level to watch, if QQQ can get above this, the bulls might be able to run.  The QQQ’s did find support around its former lows between 67.64 and 67.34.  Still want to remain bearish on the Q’s unless it can break above 68.30, looking for a move lower back to 67.34.

Chart Review SPY, QQQ, DIA

DIA:  The Dow continues its trend of being the least bearish of the indices.   DIA sold off during the morning with the market and formed a double bottom around 145.42, but failed to get any higher then lows from Tuesday and the highs from 4/2 which are all acting as resistance which is the 146.56.  Out of all the charts the Dow looks like a normal pullback after a breakout, things don’t get bearish till it gets below 145.17.

Chart Review SPY, QQQ, DIA

 

Source: Piker Trader

YHOO reported earnings yesterday which fell short of estimates which is so shocking since everyone uses YHOO these days.

In the after market yesterday YHOO fell to 22.61 but has regained some of that this morning and is back up to 23.40.  YHOO is a very interesting place on its chart and could provide a bounce point or a sell off.  Right now YHOO is trading right at its trendline and base level for last weeks breakout.  This puts it in a very precarious position, as a it nears trendline support and horizontal support it provides an opportunity for a bounce but leaves little room for any move lower.

Right now YHOO looks to be opening ever so slightly below the trendline, which is a bearish indication but trendlines can be draw with crayons so don’t take this to heart.  But what would be very bearish for this stock is a break below 22.61, this is key support and was support last night.   With YHOO stopping its aftermarket free fall at this level, the support there could provide a bounce level for the stock allowing it to climb back towards 23.92 if not high.  As it would make sense and match the chart’s trendline, but if this level can’t hold, then YHOO goes 21.89 or 21.37.

$YHOO: Yahoo Chart

 

Source: Piker Trader

Today’s selling was strong as it was another 90% down day, the last one that occurred was on 2/25 before the market rallied to new highs.

Will this happen again, not sure but typically on these days there is follow through selling and a new low gets made.

90% down day for the market

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AAII released its Weekly Sentiment Survey and boy was it bearish.  

On November 14th, AAII was at  48% this two STD from the norm, which we noted. Since then SPY  has rallied 17%,  which is right on par with the other times.   Before that the AAII hit about a 2std move on May 14th, SPY did drop 5% after this but from then to now, it has been a 17% move.   This is typical, as from AAII

We made 40 observations where bearish sentiment was two standard deviations above the mean (greater than 46.3%). This is an indication of high pessimism among investors and, potentially, a sign of a market rally in the coming months. When this occurred, the S&P 500, on average, gained 18.0% in the succeeding year.

But if we look at the latest numbers, we are seeing that the sentiment is even more bearish then previous.  That is right over half of the market is bearish right now! In fact this is almost a 3 STD move a 3 STD move would be about 56%

Woah! Bearish Sentiment!

 

AAII looks and the historical significance of this:

Raising the bar even further, we found eight times when bearish sentiment was three standard deviations above this mean (greater than 55.5%). The results were even more remarkable, with an average one-year gain in the S&P 500 of 23.7%.

That is a pretty good return and while the 54.5% is not an exact 3 STD move it is close and there is the potential that on 4/10/2014 this market can be 17%-20% higher from here which would put SPY above 180.

 

Source: Piker Trader

The market rallied today to new highs yesterday in all the sectors as the prospect of more QE continues.  

But this rallying has bought an overbought condition based on our Piker Indicator.  You can see from the chart below this isn’t a guaranteed pullback but there is a strong chance of it, this signal typically will produce a 3% pullback.    The last time we had this signal  we did not get a pullback instead the overbought condition was voided in 1 day and the market rallied.  If today’s market conditions continue the overbought condition can continue.  For weakness to come from this signal SPY would need to get below 156.86 and our indicator would need to get below 55.

SPY

Market Overbought 4.10.13

QQQ:

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Below are bullish stock chart patterns that are anticipating further bullish moves for these stocks.

FIO

Pattern:  Hammer Candle stick pattern
Target: 15.50 and above
Notes:   Today’s candle is very strong and shows a reversal after making an all time low but rebounding enough to close above the previous all time low at 14.90.   With a high short float and a bullish candle this stock has the potential to move higher.  Looking for a break above 15.50 to confirm as a break of resistance is even more bullish.
Two Charts: $FIO and $ELN

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Apple’s Chart  ticker AAPL  has once again found support at 419.68 which is a much stronger support level on a weekly time frame.  

On Friday Apple hit this level again and bounced to form a Hammer Candle which is bullish when it comes after a downtrend.  This is exactly what happen on Friday with AAPL, the bears controlled the day till it reached 419.68 which the bulls regain controlled moving the stock near its opening price forming a hammer candle.  This typically indicates a bullish reversal of the downtrend, so it is possible to see Apple climb higher.  

It still has to get above 428.28 ad then 437.36.   If it can get above this level AAPL could move back up towards 469.  But watch out cause if it fails at the 437 level we are looking at a right shoulder forming on this stock, with a potential head and shoulders pattern forming.

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Below is the DO (Diamond Offshore) Chart which is showing a bearish chart pattern.

DO: Diamond Offshore
Pattern: Descending Triangle Pattern
Triangle Size=78.06-67.08= 3.78
Price Target = 63.30
Stop: Above 67.08
Void Pattern: 68.59

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DOW THEORY

A theory which says the market is in an upward trend if one of its averages (industrial or transportation) advances above a previous important high, it is accompanied or followed by a similar advance in the other.The theory also says that when both averages dip below previous important lows, it’s regarded as an indicator of a downward trend. INVESTOPEDIA

The Dow Theory is something that people subscribe to in the market, it is the belief that the market will rally as long as transports or industrials are rallying since these are big parts of the economy.  As of now this theory is not confirming this latest rally and in fact based on the definition above its very possible it can confirm a downward trend. IYT (Transports) and XLI (Industrial) are near key support levels and if they go lower have the potential based on the theory to indicate a downward trend.  In fact they both made a new swing low yesterday while the market was making highs.  But both remain above key support and there is the potential for these sectors to bounce and join the overall rally but the fact that these two sectors are not rallying is something to be aware of especially if they continue to move lower.

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On Wednesday we looked at MS at it’s descending triangle pattern.  Now its time to look at XLF which represents the entire sector.  It too has formed a descending triangle pattern with the potential to break lower.    What is interesting is that unlike the market XLF has not been making new highs and trending lower– typically a warning sign for the market.

Pattern:   Descending Triangle
Breakdown Level: 18.06 with 18.03 as a confirmation level
Price Target: 17.60 – 2% move
Voided Patter:  Break above trendline and 18.30
Stop-Loss:  If breakdown occurs Stop-loss is above 18.06

XLF: Financial’s Descending Triangle

 

Source: Piker Trader

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