S&P 500 Intraday Bias, 10:00 AM

The bias is positive, but my analysis suggests that SPX has reached resistance and will encounter some selling pressure.

S&P 500 Intraday Bias, 2:32 PM

The bias has weakened to neutral.

Sold SSO at 51.82

5.4% loss. I bought SSO several weeks ago, when the S&P 500 was approximately at 1343. This was truly a terrible, amateur trade on several fronts. It also made me glad I don't trade options.

I have sold at around 1307 on SPX. The high today of 1309 is close enough to 1312, which I believe may act as resistance. This post explains why.

S&P 500 Intraday Bias, 10:15 AM

Positive

SPX Resistance at 1315

Above is a daily candlestick chart of the S&P 500. It has three technical studies. One is a downward sloping trendline. Another is a horizontal line at 1312, which was previously support-- now resistance. The 50 day moving average, which is also resistance, since prices are below it, is at 1316. The midpoint of the drop from 1370 to 1258 is 1314.

This confluence of forces around 1315 suggests that it may serve as a first level of resistance.

S&P 500 Intraday Bias, 9:55 AM

Positive

(I am publishing before the 10 AM consumer confidence report to distinguish the indicator from whatever the news results may be.)

S&P 500 Intraday Bias, 10:00 AM

Neutral

S&P 500 Intraday Bias, 12:20 PM

The bias has changed to neutral

S&P 500 Intraday Bias, 10:05 AM

Negative

S&P 500 Intraday Bias, 10:00 AM

Positive but approaching over-bought

S&P 500 Intraday Bias, 10:00 AM

Positive

Please, recommend a book.

Please, Recommend a Book

If anyone has a 5-star book of the self-help genre to recommend to me, please do so. I am always eager to learn and improve. For example, I would highly recommend Dale Carnegie's, How to Win Friends and Influence People. For those who haven't read it, the book suggests people skills that enhance and bring harmony to relationships.

My philosophy is that there are too many exceptional books in the world to give time to reading really good books. So, please recommend only the best!

Recommendations so Far (Many given anonymously)

"As a Man Thinketh" by James Allen - recommended by spf5
"The Master Key System" by Charles Haanel
"The Children of the Law of One & the Lost Teachings of Atlantis" by John Peniel
"7 Habits of Highly Effective People" by Stephen Covey - recommended by Narayana
"The Purpose Driven Life" by Rick Warren
Books on the power of the subconscious by James K. Van Fleet
"Extraordinary Popular Delusions and the Madness of Crowds" by Charles Mackay - recommended by Jessie Livermore via Anon
"Hagakure: The Book of the Samurai" - recommended by Anon
"How to Win Friends & Influence People" by Dale Carnegie - recommended by George R.
"The Little Prince" by Antoine de Saint-Exupéry - recommended by George R.
"Getting to Yes: Negotiating Agreement Without Giving In" by Roger Fisher et al. - recommended by M.T.
"The Logic Of Failure: Recognizing And Avoiding Error In Complex Situations" by Dietrich Dörner - recommended by M.T.
"Worldwide Laws Of Life: 200 Eternal Spiritual Principles" By Sir John Templeton - recommended by JC
"Reframing Change: How to Deal with Workplace Dynamics, Influence Others, and Bring People Together to Initiate Positive Change" Written by and recommended by Jean Latting

S&P 500 Intraday Bias, 10:00 AM

Positive

HPQ

I've read that relative strength persists and relative weakness persists. I am presenting here a stock of relative weakness. I have very little experience with individual stocks; I am presenting the parallel channel below because it does intrigue me. I welcome any thoughts on the matter.

S&P 500 Intraday Bias, 10:00 AM

Negative

Two S&P Parallel Channels

I will not be able to post and monitor the intraday bias today. Here are two potentially useful channels.

S&P 500 Intraday Bias, 10:05 AM

Positive

Reaction to News

There are always expectations set on the results of a specific news event, whether economic or company specific, i.e., earnings. For the stock market, there is no such thing as good or bad news. There are three categories, actually. News can either meet, exceed, or fall short of expectations. The market can initially not react, react accordingly, under-react, or over-react. That initial reaction can reverse or continue. My permutation and combination knowledge is rusty, so correct me if I am wrong, but that makes for 24 combinations.(?)

Each of those 24 possibilities carries its own interpretative significance-- or insignificance. This is why it is vital even for a technical analyst to be very aware of the news.

Last week, I wrote that "I believe the market will react very strongly to any news that beats expectations and may even react strongly to in-line news, given the recent string of disappointments."


Above is a 5-minute bar chart of one day of after-hours trading on the September S&P futures contract. The most recent strong green bar with very high volume was a reaction to the scheduled retail sales economic news release. These were the results, courtesy of Econoday and Bloomberg:


One may consider today's news a beat because of the upward revisions to last month's figures, but more than anything, this is in-line news. However, the market reacted strongly, shooting up 5 points after already being up 9 points in after-hours. This is one piece of the puzzle. The final piece is whether sellers use this opportunity of higher prices to sell, reversing the reaction, or if buyers, including short-covering, dominate, continuing the reaction.

Intraday Bias 12:00 PM

The bias has weakened to neutral.

Intraday Bias 10:15 AM

Positive

Value Investing

This blog almost entirely focuses on short term technical analysis. To provide a change of pace and a real treat, for the weekend I present a lecture by Whitney Tilson, a value-based hedge fund manager. The lecture beings during the second minute, and the first 55 minutes comprise the introduction to the principles and strategies behind value investing that I would like to share.

To quote a friend of mine, who is a value investor, but worked as a prop trader,"[Technical] ideas typically lack scalability, tax advantages, and require high commission or leverage costs. Compounding using the value approach is extremely scalable (e.g. Berkshire Hathaway), has tax advantages due to long-term capital gains rates, and requires much lower total commission costs."

Enjoy.

S&P 500 Intraday Bias, 10:00 AM

Neutral

My conviction has increased that prices are headed towards the lower bound of the parallel channel shown in a previous post, currently, at 1250.

S&P 500 Intraday Bias, 10:00 AM

Neutral

S&P Technical Picture

Below is one possible interpretation of the current market's technical picture.

The study above includes a downward sloping parallel channel, the 220 day exponential moving average (my default one), and RSI-14 below. Note that the 220 EMA and the channel intersect at around 1250. Also notice that RSI is close to 30, an oversold level at which one can expect a bounce. My guess is that SPX will reach 30 on RSI sooner or later.

S&P 500 Intraday Bias, 10:00 AM

Negative

Touching Base

It is evident that my call for a bottom around 1300 and for the major trendline to hold (on the log scale) has been proved wrong. I don't have anything to add that isn't being said somewhere else.

My only two cents are that I believe the market will react very strongly to any news that beats expectations and may even react strongly to in-line news, given the recent string of disappointments. Note, Ben Bernanke speaks tomorrow at 3:45 PM.

My third cent: the market has been trading in a range since February. When markets are range bound, the technical relationship between moving averages and prices become muddled. As such, I wouldn't give much weight to prices "breaking" above or below shorter term moving averages. My guess is that only a move to a 200 day moving average would provide a valid technical signal.

Edit - June 7, 2011

When I wrote, "My guess is that only a move to a 200 day moving average would provide a valid technical signal," that would implicitly be a buy signal. Just making it explicit.

Financials Trendline

The chart above is a 6-month, daily candlestick chart of a financial sector ETF, ticker: XLF. Financials currently have the second largest weighing in the S&P 500, at 15.15%. There are 10 sectors in the S&P. The trendline in the chart above suggests that XLF is due for a bounce to at least the upper bound of the channel. This should give the general stock market some lift.

S&P 500 Intraday Bias, 10:00 AM

Positive

S&P 500 Bull Market Trendline

I iterate my prior conclusion that the correction ends today; however, I would like to see a close above this trendline.

S&P 500 Intraday Bias, 10:00 AM

Neutral

S&P 500 Intraday Bias 1:45 PM

The bias has changed to neutral.

S&P 500 Intraday Bias, 10:00 AM

Positive

A-B-C Correction Near Complete

Regarding the fist image below, I explained why such a pattern would occur in this previous post. (Also regarding the previous post, the major trendline on the log scale is at around 1300 right now.)

At this stage, it is evident that the projection drawn in yellow is playing out. Now, a parallel channel encapsulating the entire correction can be drawn, and a target area estimated with more accuracy:

By tomorrow or Friday, I project that the correction that began in May at 1370 will end around 1300. Based on a T, a rally of at least one month should follow-- hypothetically speaking, possibly an excellent buying opportunity. By the way, the end of QE2 probably has already been discounted by the market.

Intraday Bias 10:15 AM

Positive

Seems like the selling pressure may be close to being exhausted; note high volume drops on the string of disappointing economic data over the last several days.