MrJohnRoss' Account Talk

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Hourly chart of the S&P:


spx.png

Prices remain within the parallel blue channel lines, with little change today. Wouldn't be surprised to see a counter-trend rally attempt to tag the upper channel line over the next few days. The 10 sma has crossed the 30 sma, which is a short term bullish signal, but as you can see from the chart, the last time it crossed upwards, the counter-trend rally didn't last long (maybe a day or two). For now, the trend is down, and you're fighting it if you're trying to go bullish with these crossovers, unless you see a deeply oversold condition, which we don't have here.

The dollar has been re-gaining some strength lately, which might be causing the PM's to lose some luster. I noticed NUGT was down over 20% today, and oil (USO) looks like it's weakening as well. Note the possible bearish rising wedge on USO, which was broken to the downside today. Also note that the PPO had a negative crossover last week. I'd be cautious in the short term if you're long oil or oil related stocks.

uso.png
 
Hourly S&P update:


spx.png


As I said in my previous post: "Wouldn't be surprised to see a counter-trend rally attempt to tag the upper channel line over the next few days."

Well, that didn't take long, did it? Yesterday's close brought us to an overbought condition (RSI over 70), which is a warning bell that a pullback was due. So today we got the pullback, which was not a surprise.

So where do we go from here? Obviously we won't stay in this channel forever, and we've been contained between the lines for almost three weeks now. It really could go either way on a day to day basis, but if I had to wager a guess, it looks like we're still in a downtrend based on the longer term charts (daily and weekly). Mr Tran is also looking very weak, and he's a market leader. Nasdaq had a nice three day run, but it's also making a series of lower highs, so I'm expecting lower lows to follow. My systems are reading (-1-1+1) = -1, a mild sell signal. The next couple of days could determine if there is a trend change, or if we continue to move lower.
 
Thanks MJR, as I got out the other day (a day early in hindsight), I now feel like I'm in some sort of alignment with the market action. Great analysis, thanks again.
 
Update on Mr TRAN:


TRAN.png


Trannies continue to sink lower. Brutal day today. If consumers aren't buying, then the transportation of those goods are going to decline. I think that's what this chart is saying. Politicians like to spin it that "everything is just fine", and "we've made tremendous progress decreasing the unemployment rate"... yada yada yada. Whata bunch of BS.

Anyway, where was I before I got sidetracked? Oh yeah. Mr TRAN...

I've shown this chart before, but we're very close to a major breakdown. If Mr TRAN breaks that 7600 dotted line decisively, the markets could run for cover. My guess is that it's not a matter of "if", just a matter of "when".

My three systems remain at (-1-1+1) = -1, a mild sell signal. Only the VIX timing system remains bullish.
 
Update on Mr TRAN:


TRAN.png

Like DaddyTin said, the "when" was today. However, we're starting to get a little oversold (see RSI), but we could drop even further to get that RSI to a nice healthy 25 range before we get a bounce. The 50% Fib retracement would put it around 7275. We'll take it day by day...

My system count is now (-1-1-1) = -3, a strong sell signal.
 
Two year chart of AAPL:


aapl.png

AAPL's been in a downtrend since the middle of last year, and could never decisively break that $130 level. Looks like a massive head and shoulders formation. The 50 DMA has stayed below the 200 (death cross) since late Aug of last year.

The $90 area has been hit three times in the last year, and has (so far) managed to bounce back. We're obviously deeply oversold (RSI and PPO), so I would expect a bounce soon. That might be a good time to lighten up on your holdings, as AAPL seems to be making a series of lower highs and lower lows. Perhaps that big gap will get filled, and we'll get a bounce up to the 100-105 range.
 
Updated daily S&P:


spx.png

Sure looks to me like we're making a rounded topping pattern, so I'm expecting further downside over the coming weeks, with occasional countertrend rallies to keep everyone guessing. RSI is fairly neutral (44), so we've got a long way to go to be oversold. PPO had a bearish crossover several weeks ago, but is still in positive territory, so again, we're not nearly oversold, and could have a long way to go.

Looking at the Fib ratios, we could fall to 1996 (38.2%), 1960 (50%), or even 1925 (61.8%). Those would be the 1st, 2nd and 3rd targets I would expect to the downside.
 
Longer term (weekly) view of the S&P:


spx.png

We're now in the season where stocks typically don't perform very well, especially the 4th yr of the presidential cycle. This large rounding top formation will take a long time to complete, with up weeks and down weeks, but it sure appears to me that the major trend is currently down. RSI and PPO have a long way to go before getting to oversold, so there is plenty of room to the downside. I wouldn't be surprised to see plenty of big red candles in the coming weeks. Worst case scenario would be possibly re-testing the Feb and last Aug lows. Eventually we may fall even further later this year, which I think is a good probability.
 
MrJohnRoss said:
Longer term (weekly) view of the S&P:


View attachment 38258

We're now in the season where stocks typically don't perform very well, especially the 4th yr of the presidential cycle. This large rounding top formation will take a long time to complete, with up weeks and down weeks, but it sure appears to me that the major trend is currently down. RSI and PPO have a long way to go before getting to oversold, so there is plenty of room to the downside. I wouldn't be surprised to see plenty of big red candles in the coming weeks. Worst case scenario would be possibly re-testing the Feb and last Aug lows. Eventually we may fall even further later this year, which I think is a good probability.
Click to expand...
The chart I have on election cycle vs Dow shows this June through next June as a good uptrend with the October dip. Saisonalität :: SeasonalCharts.de

But this year could be more difficult with the Fed tightening possible.
 
Hourly chart of the S&P:


spx.png

We're still within the parallel channels, just on a wave up to the upper descending trend line. It's certainly possible that prices go above it, since they won't stay within this channel forever. The only question is which way is it going to break. Today sure looked positive, both with oil making new intermediate highs, and AAPL making it's expected oversold bounce, thanks in part by Mr Buffet.

My guess is that we continue to slip lower over the course of the week. We're not overbought on a short term basis here. RSI and PPO look neutral, so we could head higher, but the daily and weekly charts continue to look troubling.

All three systems remain at (-1-1-1) = -3, a strong sell signal. We'll see tomorrow if the bulls can pull the market higher, or if the bears are setting a trap.
 
Updated hourly chart:


spx.png


So much for yesterday's big up day. Today it got chopped right back down, and it did so on higher volume than yesterday's big up day.

The thing I found interesting was seeing Mr Tran higher throughout much of the day, although it closed with only a minor gain. As John Murphy noted, the airlines have been the biggest drag on the trannies, but they look to be oversold and possibly turning up, so that could be a positive for the markets.

So what's on store for tomorrow? The markets suddenly seem nervous about a Fed rate hike. When tomorrow's minutes are released, I would expect the markets to like what they hear, and up we go again. Although we're not deeply oversold, the short term chart is hitting the bottom BB (not shown), so it wouldn't surprise me to see a bit of a bounce tomorrow. I'm still thinking we'll close lower for the week, as the daily and weekly charts continue to look like the downtrend is still strong.

One more stat: the % of S&P stocks with a rising PMO is only 19%. Said another way, 81% of S&P stocks have a falling PMO. Not a good omen.

All three systems continue to register (-1-1-1) = -3, a strong sell signal.
 
MJR, at what time are the Fed minutes coming out? Tia

MrJohnRoss said:
Updated hourly chart:


View attachment 38280


So much for yesterday's big up day. Today it got chopped right back down, and it did so on higher volume than yesterday's big up day.

The thing I found interesting was seeing Mr Tran higher throughout much of the day, although it closed with only a minor gain. As John Murphy noted, the airlines have been the biggest drag on the trannies, but they look to be oversold and possibly turning up, so that could be a positive for the markets.

So what's on store for tomorrow? The markets suddenly seem nervous about a Fed rate hike. When tomorrow's minutes are released, I would expect the markets to like what they hear, and up we go again. Although we're not deeply oversold, the short term chart is hitting the bottom BB (not shown), so it wouldn't surprise me to see a bit of a bounce tomorrow. I'm still thinking we'll close lower for the week, as the daily and weekly charts continue to look like the downtrend is still strong.

One more stat: the % of S&P stocks with a rising PMO is only 19%. Said another way, 81% of S&P stocks have a falling PMO. Not a good omen.

All three systems continue to register (-1-1-1) = -3, a strong sell signal.
Click to expand...
 
Lots of interesting charts to look at tonight.


uso.png

USO is at a "moment of truth", as the bearish ascending triangle has contained prices since early April. We got just above it yesterday, but got knocked right back down today, partly because of the strong dollar. We're also up against the 200 DMA, RSI is near the 70 "warning" level, and the neck of the triangle is getting very thin. Something's gonna happen, and we won't have to wait too long to find out.

Speaking of the strong dollar, did you see how it affected DUST? Up 23% today on HUGE volume (26.7 M vs 8 M avg). Is it time for the PM's and miners to take a cold shower? Maybe.

The strong dollar also affected bond yields, which went up. Result: bonds got creamed, and F Fund took it in the shorts. We got a PPO sell signal yesterday, so I knew a pullback was likely, but today was worse than I expected.


agg.png

So far, AGG bounced off of the 50 DMA, but if it cuts through that, there could be trouble in paradise.

Stocks continue to stink it up. S&P is still looking to slip down the slippery slope. The one big bright spot I see is AAPL, which looks like it bottomed last week below 90. Stoch and PPO are now ramping up, and the PPO printed a bullish crossover today. Next stop: $105?

TSLA is also looking like it may be putting in a bottoming pattern. No signs of strength from the Stoch or PPO yet, but keep yer eyes peeled.

System count: (-1-1-1) = -3, strong sell signal.
 
60 minute S&P:


spx.png


The head and shoulders neckline (black dashed line) was finally violated today. However, we got a bit too oversold (RSI, PPO, lower edge of the BB), so we bounced back up to the neckline by the end of the day.

Prices still remain in the channel, but we're at the lower edge of it. If I had to guess, I'd say that we get a rebound tomorrow, to at least get us to the center of the channel, possibly near 2050. That would relieve the PPO and RSI of their still mildly oversold conditions, while keeping the downtrend intact.

System count remains (-1-1-1) = -3, a strong sell signal. Possible shooting star on the VIX today, which may indicate a reversal in the near future.
 
Time to take a longer term view. Weekly S&P:


spx.png

The massive dome continues. After three straight negative weeks, the market finally eeked out a little gain. As I said in my last post, "If I had to guess, I'd say that we get a rebound tomorrow, to at least get us to the center of the channel, possibly near 2050". We got the rebound, and ended up at 2052. We all know anything can happen with the markets, but I'm really doubtful that we'll see the market get above the April 2111 high point again anytime soon. From what I see on the chart, it looks to me like the path of least resistance is lower. We got close to the upper edge of the BB in April, and now it's time to at the very least gravitate towards the center, and possibly head towards the lower edge. It also appears that the Stoch and PPO look to be topping, and are beginning to head back down.

The other reason I think that the markets should head lower is shown in the next chart:

PE Ratio.png

This chart shows the 5 year historical P/E ratio of the S&P in the upper window, and S&P corporate earnings in the lower window. Hey, guess what? If corporate earning keep heading lower (as they have since the beginning of last year), and the stock market continues to go higher regardless, the P/E ratio must go higher! So with the historical mean P/E ratio of 15.59, and a current ratio of 23.72, it makes no sense for the stock market to go much higher. I would certainly think that Yellen and company might actually look at charts like this, and say to themselves; "Golly gee, maybe making the stock market go higher from this point isn't such a good thing!"

A simple calculation of earnings ($86.53) and nominal P/E ratio (15.59), would mean the market should "normally" be at 1349. With the market currently at 2052, that would mean a 34% haircut, just to put the P/E at the "average" level. Just something to think about while you're hoping the market goes higher and higher week after week. It could happen, but again, I think the path of least resistance is down.

If I had to guess, I'd say that we're more likely to see a lower red candlestick next week on the weekly chart, possibly testing the 50 week moving avg, which is currently at 2024.
 
Out of town guests here at the house all week, so I've had no time to post. Market is short term overbought, so I'm expecting a pullback today. System reading is (+1+1+1) = +3, a strong buy signal, so I'm moving back in.

100% C as of C.O.B. 5/26/16
 
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