coolhand's Account Talk

[coolhand]

A few days ago I showed you a chart of the Bank Index, BKX. It was in rally mode and I noted that this was highly suggestive of rising rates. It was and we got one on Wednesday. Yesterday, I said that I was looking for some weakness on Wednesday, but that it was likely a buying opportunity. We got some weakness. Was it a buying opportunity? I think it might have been. The action has to be maddeningly frustrating for the bears. Downside traction is hard to come by. Money flows are shifting, so while one sector or index may be getting hammered, others are rising. The fact is, money has to find a home and it usually seeks those places where it's treated best. The exception to that is a central bank manipulated correction. That's why I watch liquidity, which remains steadfastly bullish.



We got a modest pullback in the S&P 500 on Wednesday. The trend remains up.



The DWCPF pulled back a bit deeper, but not enough for price to drop back below that line of resistance. That area is still resistance all the way to 1239 or so. We can see that the last rally off the bottom in mid-May has come a good ways.

My indicators are largely neutral to bullish. The market is due a more meaningful pullback, but so far it's been elusive. It could come at any time, but fresh highs could too. I'm still not excited about downside prospects.

 

[coolhand]

Yesterday, I said that I wasn't sure what the market was going to do on Thursday as I could see it going either way. I also said I was not enamored with downside prospects. I'm still not. The pullback we got on Thursday did not do much damage to the overall technical picture. The weakness is likely a buying opportunity.



The S&P 500 shows what appears to be a moderate term consolidation period that will likely resolve to the upside sooner or later. Price is well above the 50 dma and the 200 dma is way down there.



The DWCPF fell back below a key resistance area, but price did not make a lower low, so I'd not read too much into the action at this point.



The EFA is struggling, though price remains well above its rising 50 dma. Momentum is still falling, however, and RSI is well away from an oversold condition. It doesn't have to get there, but downside momentum is still building.

NAAIM came in a bit more bullish, so no new news there. They've been largely bullish for some now and that should keep us in the bullish camp too. Breadth is in a short-term decline, but still bullish overall.

I am anticipating a reversal back to the upside on Friday, though not necessarily a big rally. The downside action is hardly inspiring if you're a bear.

 

[coolhand]

I am on travel again this week, so there's a chance I have trouble posting over the next few days.

I said in my blog over the weekend that the bears needed to be beware as my indicators just were not leaning much in that direction. So, now the first trading day of the new week is behind us and the S&P 500 is sitting at another all-time high with the chance for more gains very much in play.



Momentum has turned back on the S&P 500. RSI is just a tad from overbought. I would not get overly concerned about the high RSI reading yet as overbought can get a lot more overbought, but we'll take it a day at a time.



Price on the DWCPF closed back into that resistance area again. It's now a stone's throw from its previous intra-day high.

The EFA managed to rally again on Monday, but has yet to challenge its previous high.

Nothing has really changed. The options are still neutral, but more importantly for the bulls is that breadth and liquidity remain bullish. Buying dips is still working.

 

[coolhand]

I said I was leaning bearish again on Wednesday given the weak close on Tuesday and repeat low reading on TRINQ. Obviously, we got more weakness, but it wasn't ugly.



Over the past 2-3 weeks, price on the S&P 500 is stair-stepping higher. This chart is not bearish, we just have some short-term weakness playing out.



The DWCPF is testing its previous low and closed with a lower low, but there is support in the 1215 area just under the closing price. Momentum is still falling, however.

I am seeing a deterioration in my intermediate term system, but it does remain positive. Breadth is still positive too, but is close to flipping negative.

Overall, I tend to believe that the technical indicators are simply setting up the next rally after a period of consolidation. While NAAIM may be bullish, a lot of other surveys are harboring a goodly number of bears; certainly enough to keep the market buoyant. And NAAIM is smart money, while the others are not.

The downside may not be finished yet, but I'm going to be looking for a chance to get long again in my other accounts outside of TSP.

 

[JamesE]

As always, much appreciated sir!

 

[coolhand]

As always, much appreciated sir!

YW, James. :smile:

While I certainly do not have a crystal ball, I've learned a lot over the years, and if I can help anyone out there leverage what I have learned to their advantage, than I'll be pleased. :smile:

 

[JamesE]

Your style and delivery of the charts and analysis keeps things simple and to the point. I really appreciate the "meat and potatoes" delivery while keeping the noise out.

I did miss your contributions when you went on hiatus a while back. For me, your work is a must read and a vital component in the decision making process for those of us who are actively involved in growing their retirement!

Best to you,
Jim

 

[Robo5555]

What Jim stated. Totally agree. Thank you sir.

 

[coolhand]

Thank you for the thumbs up folks. I am glad you noticed that I keep things rather simple. I've got plenty of charts and have toyed around with them for some years now, but I've come to realize that more is not necessarily better. Other technical indicators that I do like include Fibonacci and Bollinger Bands. I just don't tend to use them very often.



Price on the S&P 500 dipped a bit more on Thursday, but no technical damage yet. Momentum is still falling.



The DWCPF managed to get back some of Wednesday's losses. Momentum is still falling, however. The 50 dma may get tested.

NAAIM came in relatively unchanged on Thursday and that keeps it bullish from my point of view, though shorter term traders would view it as neutral. The options are decidedly bearish for Friday and that includes the dumb money being bullish (which is considered bearish). I have noticed for some time that the dumb money isn't always dumb, so we'll see what happens.

My intermediate term system is still positive. Interestingly, BPCOMPQ is rising (that's positive) and that is an intermediate term indicator. Breadth bounced, but remains in danger of flipping negative on any further weakness. Banks are seeing selling pressure over the past few days, but the BKX is well above support right now.

There are a lot of cross-currents in this market, which does concern me to some extent, though that's not necessarily bullish or bearish. It just means there could be some surprises down the road as the the indicators are giving mixed signals. NAAIM acts as somewhat of an anchor for me as those folks are bullish for a reason.

 

[ravensfan]

Thanks coolhand! Your analysis is always appreciated and a "must read" each and every evening.

 

[coolhand]

The S&P 500 tried to test its high from last week, but fell short of the attempt and closed near the neutral line. Volume was down. Momentum is leveling off.



The DWCPF also tried to test its highs, but fell short. The index was up more than the S&P 500, however, and could still test its all-time intra-day high again. Momentum is still rising.

Breadth is on another short-term uptrend. There could be more upside coming this week, but the technical indicators are not exactly screaming rally. Still, when you have liquidity on your side, it usually doesn't matter.

 

[coolhand]

Price on the S&P 500 took a dive on Tuesday and closed near support in the 2420 area. Momentum has turned down, of course.



The DWCPF also took a shot lower, but did not quite test its previous low. Still, it retraced the bulk of the past 3 days of gains.

The selling pressure may have seemed concerning, but I don't see much evidence that this is anything more than a short-term drop lower. Breadth and liquidity, while lower, are still very much positive. No significant support lines have been broken either. NAAIM was bullish to start the week. The options are neutral heading into Wednesday.

I think the market may probe lower tomorrow, but I don't think this bout of weakness is going to last. I am still expecting a more significant decline as I mentioned a few days ago, but I don't think this is the start of that decline. Let's see how tomorrow plays out. I'm looking for an "up" close tomorrow. TRINQ is at a very high level and that suggests a reversal the next day. How much of a reversal is open to debate if we get it.

 

[coolhand]

Yesterday, I said that the selling pressure on Tuesday may have seemed concerning, but that I didn't see much evidence that it was anything more than a short-term drop lower. Breadth and liquidity were still very much positive and no significant support lines had been broken. NAAIM was bullish to start the week as well. I just did not see that sell-off lasting very long; especially after TRINQ closed at a very high ready.

I said I was looking for an "up" close and we sure got that in spades.



The S&P 500 retraced all of its Tuesday losses. Momentum turned back up.



The DWCPF retraced all of its losses too, and then some. It is now back at its all-time closing high.

Cumulative breadth hit an all-time once more today. Liquidity is at high levels. What's not to like if you're a bull?

The reversal was strong, which makes me think we're already near a top again; at least a short-term one. TRIN and TRINQ are now neutral. The options market won't settle for another hour or so at the time of this writing, so I am not sure how they are positioned for Thursday at the moment. In any event, I think the market gives something back on Thursday.

 

[FAAM]

Your "I think"s this week are playing out accurately; now are you thinking "up" for a couple days, Plz? BTW, thx again much for sharing thoughts and charts!

 

[coolhand]

As I said in yesterday's post, I thought the market would give back some of Wednesday's gains and it did just that. More than I expected, but down just the same.



Price actually tested the 50 dma on Thursday and bounced, closing for a significant loss, but also forming a long lower shadow. The successful 50 dma test and long shadow are bullish.



Similar story with the DWCPF. The 50 dma did not get tested, but this index isn't as important in that context as the S&P 500 is. But it was close to a test.

Volatility like this usually resolves in the direction of the longer-term trend and that is (of course) up. So I'm bullish by that measure.

Breadth and liquidity have not changed their bullish stance. Better, NAAIM got a bit more bullish today. Taken as a whole, this market appears poised for some upside, but is it simply another bounce, or something more? I know this, the bulls have much more going for them than the bears do. I'm looking higher from here.

 

[Boghie]

Coolhand,

Although very late, it is very good to see you active again. I have been lying in the tall grass just milking the easy gains. Now I have to relearn to read the charts. Probably some choppy weather for the next few...

 

[coolhand]

It was a choppy post-holiday trading session. The S&P 500 traded in a fairly narrow range. Momentum is turning up, but price seems stuck in a trading range between the June peak and the rising 50 dma.



The DWCPF had a tougher day on Wednesday than the S&P 500 as price spent the bulk of the trading day below the neutral line and closed for a moderate loss. Momentum is flat.

The OEX P/C is bearish for tomorrow. This market remains bullish, but it is tough making money in either direction right now. I am looking for maybe a bit more upside tomorrow before a possible turn back down, though nothing overly bearish at the moment. NAAIM reports tomorrow.

 

[coolhand]

I'm going to be tied up this afternoon and evening, so I'm posting early before some of indicators have settled.



The market got smacked pretty good today. I was looking lower, but we got more weakness than I expected. And that weakness did some technical damage too. Price on the S&P 500 closed below its 50 dma for the first time since mid-May. It bottomed at that point, but I am not so sure we'll see a bottom this soon this time around, though a bounce is not out of the question.



The DWCPF also closed below its 50 dma and trend line support. Momentum has turned down.

My intermediate term system may have flipped negative today, but not all of my signals have settled, so I won't know until later this evening. Breadth is very close to flipping negative. Liquidity remains positive, but took a hit.

Interestingly, NAAIM remained quite bullish today. They have been good longer-term predictors of market direction for a little while now. The fact that they remain bullish certainly suggests that this shot lower may be short-lived. But next week we have Weird Wolly Wednesday coming up and that could mean more volatility over the days ahead. It's one of the reasons I think a bottom may not be in despite the bullish NAAIM reading.

I am going to look over my data later this evening. If a bounce comes on Friday, I may head to the sidelines for at least a few days. But I won't know that until I review all of my signals. I also don't know how the OEX P/C is positioned yet either.

I'll follow up with a short read on my indicators later this evening.

 

[coolhand]

As update to my previous post, my intermediate term system did indeed flip negative today. The OEX P/C is now neutral.

Tomorrow may see some chopping around. The bias may be higher given Thursday's sell-off, but I am skeptical that a bottom is in. I may head to the G fund tomorrow if we get a decent bounce, but I don't know yet. Otherwise, I may just sit tight again and ride it out. The risk is that this market could turn back up again and make another run to the upside now that the indicators are looking suspect. Also, NAAIM is bullish, so that suggests that while a bottom may not be in (remains to be seen) the pros at NAAIM are not positioned for any serious selling pressure. This is not a day-trader organization and they are willing to ride out any volatility with an eye on the intermediate to longer term.

 

[felinecrl]

Good call Coolhand. I had to make a move to the G today as I was all in I Fund, as it looked like it was struggling uphill, but by days end, it barely made it to where it left off the day before. Patience is a virtue.