coolhand's Account Talk

[coolhand]

In my last post, I said the options were bearish and that NAAIM was indicating the likelihood of more selling. That was for Friday's action, which saw more decline in price. In fact, price broke through and closed below the 200 dma on the S&P 500.




Looking at the charts, I see possible horizontal support for the S&P around the 2725 area. The problem is, the DWCPF has already broken its horizontal support, so that doesn't bode well for support holding on the S&P, but we'll have to see. Both charts are essentially oversold.

My intermediate term system continues to look bearish. Cumulative breadth is bearish. The A/D Line on the NYSE is ugly.

Sentiment shows the OEX neutral and the CBOE bullish (for Monday). NAAIM is leaning bearish, but not heavily. TSP Talk is neutral.

For what it's worth, gold had a nice up-day on Friday. Bitcoin (and crypto in general) have been doing well for weeks. Bonds are signaling trouble. Are these collective indicators a sign of potential trouble for the stock market? That would be my interpretation, but only that it's possible and not a given.

I remain bearish for now. Try not to get too complacent. The market may be in more trouble than we think. That doesn't mean sell everything, but as I said a few posts ago, NAAIM was getting defensive and I suggested following their lead. Hopefully, you have some dry powder on hand should the market find a bottom.

 

[coolhand]

The market is seeing some volatility right now. Today's action was more or less a draw between the bulls and the bears and they fought over price direction.




Not a lot of change in the charts, though it's notable that the 200 dma continues to hold on the S&P 500.

Breadth remains negative and was flat today. My intermediate term system remains solidly negative (bearish).

Sentiment shows that the OEX and CBOE are bearish for Friday. Perhaps the biggest news is that NAAIM got more defensive, but they still have their bulls holding to their longs. I note that the bears in that survey have increased their shorts. This indicates to me that the bears are likely not done and lower prices are coming over the days ahead. It is not clear to me how much damage we might see, but I am still not expecting the sky to fall (at least not yet).

I started out the week neutral, but I am shifting to a more bearish stance for the next few days.

 

[coolhand]

While the market was underwater the entire trading session today, there was some rallies mixed in with the selling. Unfortunately for the bulls, it wasn't enough to price back over the neutral line.




So, the charts aren't looking any better. The 200 dma is now getting tested on the S&P 500. It held today, but we obviously may get a retest. Price remains on the 200 dma on the DWCPF.

This evening, the options are looking on the neutral side. TRINQ closed at a low level, which is normally bearish. Cumulative breadth is at a 2-month low an in danger of going lower.

This selling seems controlled to some extent, though it could certainly get worse before it gets better. The indicators suggest more selling, but we are due a bounce. The 200 dma may get taken out on the S&P 500 (head fake), so we'll have to be on the look out for that. It may be used to suck in more bulls before a move back up.

Having said that, something may have changed too. Be open to the possibility of a more serious decline as things play out. My intermediate term system is NOT hinting at turning up yet.

NAAIM reports in the morning. Remember, they got somewhat defensive last week. They saw risk rising.

 

[coolhand]

After having a down week last week, the market started off the new week with even more selling.




It didn't start out that way in the morning session, but the early rally faded to the neutral area for a while before succumbing to even more selling pressure in the mid-afternoon. Price closed near its lows of the day. The S&P 500 inched closer to its 200 dma, while the DWCPF, which had relative strength to the S&P 500, fell to its lows from last Thursday (still under the 200 dma). The charts are still not ugly, but there was some volume behind today's action.

Cumulative breadth is negative and at the lower end of its trading range currently. Sentiment shows the OEX leaning bullish for Wednesday, while the CBOE is neutral.

The market is due a bounce at the very least and the OEX suggests we may get one.

 

[coolhand]

The TSP stock funds had a down week last week. Friday's action did close on a positive note, but the charts remain somewhat dicey.




We can see that price remains below some key areas. In particular, price has been below the 50 dma on both charts for about 2 weeks now. Price has now been below the 200 dma on the DWCPF for a couple of trading days.

I pointed out that NAAIM is now neutral. I said in my last post that the market is not likely to fall apart with this reading, but I am now going to open the door to the possibility that the market may be slowly approaching a bigger sell-off. It has been a bull market for a long time, so it is very easy to favor the longer term trend. Yes, that's been the path of success for those that have largely held long, but let's now entertain the possibility that the weakness the market has endured the past few weeks may be an early warning. We'll step through this possibility day by day as the indicators play out.

So, NAAIM is neutral. TSP Talk is neutral this week. The OEX is neutral to modestly bearish. The CBOE is bullish. Sentiment is neutral overall.

Cumulative breadth is straddling the neutral line. TRINQ is bullish for Monday, but TRIN is neutral. My intermediate term system remains negative with no hint of turning back up as yet.

We are in uncertain territory with respect to market direction. I am going to suggest to follow NAAIM and have some dry powder on hand, but not necessarily move to all cash, though that is really up to your particular risk tolerance and personal perspective. I am not calling for a big decline, I am only suggesting at this point that one may be coming. It is also possible that we get yet another rally when the market finally breaks out of its sideways pattern (since late February for the DWCPF; the S&P 500 still has slight discernable upward tack).

The indicators will eventually tell us one way or the other. I am neutral for the new week.

 

[coolhand]

As expected, the bears continued to push price lower. In fact, they hammered the bulls pretty good and did some technical damage as well.




We can see that the DWCPF is leading the S&P 500 lower. On that chart, price closed well below the 200 dma. The S&P 500 is faring better, but price still remains below the 50 dma, so it's hard to get overly optimistic.

This evening, the OEX is back to neutral, while the CBOE is bullish. NAAIM came in more neutral as the bears continue to reign in their shorts and the bulls aren't heavily bullish. Again, it's a neutral picture for this smart money. The fact that bears are not falling over themselves to short the market tells me it's not likely going to fall apart, though we could still see more selling.

For now, the bears appear to have the upper hand, but I don't think they'll get a ton of downside traction based on the NAAIM reading.

 

[coolhand]

The back and forth battle between the bulls and bears continued today as the bears countered yesterday's rally with a push to the downside once more.




But price didn't test Monday's low, which is a plus of sorts. On the other hand, the 50 dma continues to act as resistance. We should also remember that the 200 dma has held on the DWCPF.

This evening, the OEX is bearish, while the CBOE is bullish. That combination tends to favor the smart money (OEX), so the bears may not be done. We'll have to see.

Breadth remains positive, but sideways. My intermediate term system remains negative. TRIN and TRINQ are neutral.

Overall, the indicators are still mixed, but do I favor more selling on Thursday. It doesn't have to be a lot if we get it. NAAIM reports in the morning.

 

[coolhand]

After being pounded lower the past couple of trading days, the bulls countered with a decent bounce.




The bounce pushed price back towards the 50 dma on the DWCPF as well as the S&P 500. That's obviously an area of resistance at the moment.

My intermediate term system remains bearish, while cumulative breadth went positive again. While positive is at least somewhat bullish, breadth is really bouncing above and below the neutral line right now. TRIN and TRINQ are both leaning bearish this evening.

However, the OEX is bullish, while the CBOE is neutral.

It remains a mixed bag as the tug-of-war continues..

 

[coolhand]

Friday's weak action bled over into Monday and sure enough we got the volatility the indicators suggested we'd get.




Price on the S&P 500 has not retested its low and to this point the 200 dma has not been violated. The same cannot be said of the 50 dma, but that's where the battle appears to be. Price on the DWCPF is testing its 200 dma. It's a compressed area between the 50 and 200 dma's on that chart. Looking at the past several months, we can see price has traded in a range during that time. But it did hit a fresh high just a couple of weeks ago. Was that the top? NAAIM still shows a good number of bulls, though as a group they are more neutral as of last week. That suggests there is at least some trepidation about the short term. The longer term has been bullish and that has not changed.

Breadth has flipped negative again. The options are neutral. I think we have more of the same on tap. It could be a battle this week.

 

[coolhand]

Friday, we saw price close below the 50 dma on both charts. I suspect we may be setting up a small bull flag.




Cumulative breadth dipped and remains bullish, but not overly bullish. It's near neutral. My intermediate term system remains bearish.

Sentiment shows the OEX looking neutral, while the CBOE is bullish. NAAIM is neutral. TSP Talk got bulled up, which is bearish.

As I stated in my previous post, I am thinking we may have some volatility to contend with this week, but the market is likely to eventually resolve to the upside. I am neutral for now.

 

[coolhand]

I thought the market might revisit its lows prior to any serious move back to the upside, but today's extension of the rally calls that possibility into doubt, which is fine.




We can see that price has closed above the 50 dma on both charts. I'd like to see that recapture stick for more than a day or 2, however.

Most indications suggest a low may be in, but I'm not sure for how long or how much upside we can expect in the short term.

Breadth remains bullish. My intermediate term system is improving, but remains bearish. The OEX is bullish this evening, while the CBOE is neutral. NAAIM came is more bearish overall, though the bears aren't overly bearish. This suggests to me that we may have some volatility to contend with in the days ahead. The reading is neutral at face value.

 

[coolhand]

After a short period of selling early in the trading day, the bulls moved back in to take prices higher and build on Tuesday's gains.




Price on both charts appears poised to test the 50 dma. If it can get back over that average and hold gains, a bottom may be in.

Breadth is bullish again. The OEX is neutral and the CBOE is bullish.

NAAIM reports in the morning. I'm thinking we see more upside on Thursday, but we need to keep an eye on the 50 dma and whether it offers resistance.

 

[coolhand]

After Monday's plunge, the market was due a bounce and that's what we got.




It would have been more bullish if price didn't fall off in late afternoon trade, but at least the selling stopped (for now).

Breadth has moved back to neutral. I note that TRIN and TRINQ closed at low levels and that could dampen any extension of Tuesday's rally. However, the CBOE is bullish again, but the OEX is bearish. Mixed signals make it tougher to make a stand on market direction, but I suspect the bears are not done and that the lows will be revisited once more. It may be Wednesday. We'll see.

 

[coolhand]

Monday's market plunge is going to have many bulls questioning their bullish conviction.




While price on the S&P 500 has not tested its 200 dma yet, the same can't be said for the DWCPF, which saw price close below that key average. Head fake? Does the S&P 500 need to tests its 200 dma? As uncomfortable as it may be for the bulls, the bears might not be done yet.

Breadth is now negative. My intermediate term system was already negative. The options were bullish for Monday and remain that way for Tuesday. It's the CBOE (dumb money) that's showing a very bearish sentiment reading (historically, that's bullish), but they've been right so far. Are they going to right again on Tuesday?

The geo-political picture may very well be influencing markets right now. But NAAIM was still bullish overall. They've been pretty good predictors of future trading for a long time now. That doesn't mean they aren't susceptible to being on the wrong side from time to time, but it's been profitable to follow their lead.

So far, we may be seeing an overdue market correction. Those are difficult to predict in many cases. For now, we'll have to watch the 200 dma on the S&P 500 for our next clue.

 

[coolhand]

That 200 dma sure looks possible on the $SPX. I'm still 10% C S I (couldn't see it coming ;damnit) Looking to add when it does turn, but that day may be a 1000+ bounce day on the DJIA.

That is another reason I like NAAIM. If I can sort out how they are leaning overall, I don't have to worry so much about bobbing and weaving with the market. I think most of these money managers play it longer term. With TSP, that's probably a better approach.

 

[BooDog]

That 200 dma sure looks possible on the $SPX. I'm still 10% C S I (couldn't see it coming ;damnit) Looking to add when it does turn, but that day may be a 1000+ bounce day on the DJIA.

 

[DreamboatAnnie]

CH, Thank you for your posts, charts and very useful information! Especially rely on the NAAIM info. Your comments are very appreciated and the best! :smile:

 

[coolhand]

The 50 dma is now getting tested on both charts as the bears chip away at recent gains.




My intermediate term system continues to deteriorate (it's already negative). Momentum is bearish. Cumulative breadth is now negative (not by a lot).

The options are bullish. NAAIM saw some money managers go short, but the bulk of these guys remain long. The longer term trend is still up. While a low may not be in, the indicators I am looking at suggest that the bulls will stage a comeback and it may be to new highs. But first we have to get past the pain.

 

[coolhand]

The market was all over the place today, which may be part of a bottoming process. But there's still a lot of geopolitical churn and it's not insignificant, so we may be in for more volatility.




Price on both charts closed lower, but the 50 dma remains supportive.

My intermediate term system is negative. Breadth is now neutral. The options are leaning on the bullish side. NAAIM reports in the morning.

I remain neutral, but the market could be susceptible to big moves in one or both directions.

 

[coolhand]

After recovering from heavy losses on Monday, the market was tested once more and this time the bulls did not offset the losses by nearly as much. This turns a lot of technical indicators down.




Price on the S&P 500 came close to testing its rising 50 dma. The DWCPF is also close to testing its 50 dma, but the chart still looks to be trading in an intermediate term range. The S&P 500 looks more bearish, but it's too soon to get overly concerned.

Trade talks appear to the be the cause of the selling pressure and the market is making it known it doesn't like the prospect of more tariffs. But this situation can still turn around very quickly and catch newly minted bears off guard. Of course, we may not have a bottom yet either. Bullish sentiment is now getting tested a bit and the losses so far are not outside of the realistic possibility that we are seeing a minor market correction (it was due).

Still, the geopolitical situation goes beyond trade tariffs as far as the potential catalysts for this market to sell off more than many might expect. I am not predicting such, but just pointing out that this selling pressure may be an early warning. If you are following any alternative news related to the financial markets, you'll probably have a good idea why I am at least a little wary.

Be that as it may, it's still too early to embrace such a scenario as things could go the other way too.

The options are looking a bit bullish this evening. TRINQ is bullish (1 day signal). Breadth is still positive, but under attack.

As tempting as it is to flip bearish, I'm going to go neutral from my previous bullish outlook for the week because we're due a bounce after this much selling. I'm really looking forward to the next NAAIM reading, but that's not for another couple of days. They were bullish last week and that tells me that the downside should still be contained.