Any trader in the market right now has seen dramatic moves intra-day.  While investors may not typically be too concerned about intra-day movements, those large swings show just what kind of battle is being waged each day in this market.  The market is see-sawing, but is approaching an important level – this level could sway the battle for one side…at least for now.  With so many other levels beyond to watch it is important to be aware of points where the battle is likely to turn.

Adam breaks down these levels in this new video.  Here are his comments….

The battle between the bulls and the bears continues in the S&P 500 with neither side able to gain the upper hand. This choppy trading action will eventually lead to a large move one way or the other. The bulls are betting that we are headed higher and the bears are betting that the economy is going to tank.

In my latest video, I share with you some of the key technical points that are still in play and where the market needs to go in order to break out of the current logjam that it’s in.

As always our videos are free to watch and there is no need for registration.

Please let us know your thoughts.

http://www.ino.com/info/591/CD3784/&dp=0&l=0&campaignid=3

All the best,
Adam Hewison
President of INO.com
Co-founder of MarketClub

If you watch the financial news, you have likely heard that many market participants are frustrated with the markets at the moment.  The market at the moment is range bound in a longer term downtrend.  Volume has leaned towards the light side as well.  The range is not clearly defined, and the easy way to describe the current environment is:  choppy, with large intra-day and multi-day reversals.

Down around 1040 on the S&P is an important technical area with multiple lows having been put in there.  Penetration below that low is longer term bearish, but given recent market action false breakouts are not unlikely making this market difficult to time for a sustained move in any direction.  Therefore caution is warranted when trading this market.  Keeping stops tight and possibly having to enter a position a couple of times before an actual sustained move occurs is not a bad idea.  Given the large swings that are occuring, profiting from a move will likely recoup small losses, but being on the wrong side of a loser can hurt in this environment.

Longer term traders can watch the 1040 as mentioned above.  Also, a move above 1135 is a bullish signal, followed by 1175 down the road.

1040 and 1135 is the high and low for recent price swings.  While this is a large range, trading within it can be defined as trading in “no man’s land”.  The trend is down currently, so a bias is given to the downside, yet there is instability on the short-term time frames which makes predicting short-term moves difficult.  This is evidence by the aggressive nature of the price swings-strong forces on both side reacting (actually, let’s go with overreacting) to incoming order flow.

Traders may benefit from focusing on individual stocks that are exhibiting certain characteristic such as strong trends, chart pattern breakouts or defined ranges.

Cory Mitchell, CMT
~Please see our legal disclaimer page so you know your risks in trading.

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Good Trading,
Cory Mitchell, CMT

The end of the week saw Thursday and Friday strong but on very low volume.  A sign of buying weakness or just the start of summer?  Ultimately this will be revealed by where price goes and the levels that need to be watched.

The rally through the early part of the year was also on low volume, but the market continued to push, thus volume is not an immediate indicator but just a warning signal.

The downward trendline on the daily chart currently intersects just above 1100 on the S&P 500, which is in close proximity to two former daily highs.  This creates a resistance band between 1100-1106.  Respect of the band indicates continued downward pressure moving forward.  Pentration above that band indicates buying pressure and a further correction.

Since the trend is currently down beware of false breakout above that band, even though it would be a breach of the dominant trendline.  Volatility remains high, although it has subsided somewhat from the later part of last month (see VXX, an eft which tracks volatility).  The weekly average range of price price movement on the S&P has increased to almost 50 points; this can be used in estimates likely moves going forward for future weeks (it is an average so it is continually changing).

If pressure once again flips to the downside, the ultimate test will be if  the the 1040 area holds.  With the market closing at 1091 this week, that is within the weekly averages grasp.    Penetration of those lows is very bearish although there are multiple support levels below as can be seen on the chart via horizontal lines.

Resistance above 1106 comes in at 1115 and just below 1150.

Chart is below.

Cheers,

Cory Mitchell, CMT

~Know your risks.  See our legal disclaimer page.

Robert Prechter believes deflation is a primary concern at the moment …

Deflation: How To Survive It
Important warnings about deflation from Robert Prechter.
By Elliott Wave International

The M3 money supply in the U.S. is contracting fast, and deflation is suddenly in the news again. It’s a good moment to catch up on a few definitions, as well as strategies on how to beat this rare economic condition. And who better to ask than EWI’s president Robert Prechter? Here’s a free excerpt from a collection of his most important essays on deflation.Read more.

S&P 500 Daily, Free Stock Charts

Another volatile week for stocks.  Traders simply did not want to put out large orders for fear of getting run over.  But, introduce fear (from longs and shorts) in thin liquidity and price levels have a tendency to “overshoot”.  Prices are taken to extremes and then snap back like an elastic – in both directions.

I have never seen individual securities with such “sketchy” bids and offers.  No one wants to be trapped in a big move, and because no one wants to be stuck in a big move, big moves occur because there is a rush for the exits (for both longs and shorts) as traders grab what liquidity they can.  It has made for some very interesting trading days.  Volume may still be high in some securities, but traders are “order-cancel happy” at the moment.  And with good reason – this market is on very shaky footing.

I will get to a brief analysis in a moment, but this week was a major reminder that no matter what time frame we trade on, as individuals we don’t need to fight the direction of the market.  Today there were large swings, and bidding into falling prices was a stressful time to say the least (or shorting into a rally).  At times like this hopping onto momentum is the best option – because there is no solid rules for how far something can take you into the negative at this point.  Just as this is true for day traders trading daily swings there is no reason for swing traders to buy as prices fall.  Most individuals traders transactions will not affect the price in the aggregate, and thus there is no reason to predict a reversal – we can simply wait for it to start.  And with the volatility right now you could be in that trade for a nice swing.  All said, these markets are shifting on a dime, be awary and don’t get tied to a trade or a direction.

Shifting focus.  The daily chart still has a down trend.  We saw new swing lows, this week, moving below the “flash crash” levels.  We also moved below the February lows – a major swing low.

I am not bullish till 1134. Not this this would turn my attitude completely, but at the moment that is a level I am watching on the upside.

A drop below 1040 would create a new low on the S&P 500 and warn of a further correction.  The S&P closed out the week at 1089.41.  So both of these levels are a ways away, but we moved close to 15% in May, so 40 points in either direction is nothing.

A more detailed analysis will be upcoming in this weekend’s newsletter.  If you aren’t getting it – you should!  It is free and you can sign up on the right.  It is sent out on the weekend.

Also, there’s only one week left to download Robert Prechter’s free 10-page market letter. Our friends at Elliott Wave International are featuring the free download through June 7.

The free issue, titled “A Deadly Bearish Big Picture,” contains recent research and market analysis that goes beyond the news headlines to give you urgent,independent market forecasts. Prechter’s market outlook has changed dramatically since February of 2009 when he informed his Elliott Wave Theorist subscribers to turn bullish.

The markets have turned more and more volatile by the day, with huge market swings spanning hundreds of points! It’s time to prepare yourself.

Get your FREE copy of Prechter’s latest research through June 7 – Download the Theorist now.

Cheers,

Cory Mitchell, CMT

~Something is only worth as much as someone else is willing to pay for it.  Period.

Know Your Risks – this month a bear ate a bull.   Please read our Legal Disclaimer page to understand market risks.

I came across the following article, and it has such a  different way of looking at the market that I just had to post it. After you read the article…maybe the recent Shrek box-office disappointment is the first stage…you’ll understand after you read it.  Enjoy.

Cory Mitchell, CMT

What Can Movies Tell You About the Stock Market?
March 15, 2010

By Editorial Staff

The following article is adapted from a special report on “Popular Culture and the Stock Market” published by Robert Prechter, founder and CEO of the technical analysis and research firm Elliott Wave International. Although originally published in 1985, “Popular Culture and the Stock Market” is so timeless and relevant that USA Today covered its insights in a recent Nov. 2009 article. For the rest of this revealing 50-page report, download it for free here.

This year’s Academy Awards gave us movies about war (The Hurt Locker), football (The Blind Side), country music (Crazy Heart) and going native (Avatar), but nowhere did we see a horror movie nominated. In fact, it looks like Sweeney Todd, The Demon Barber of Fleet Street was the most recent to be nominated in 2008, for art direction (which it won), costume design and best actor, although the last one to win major awards for Best Picture, Director, Actor and Actress was The Silence of the Lambs in 1991.

Whether horror films win Academy Awards or not, they tell an interesting story about mass psychology. Research here at Elliott Wave International shows that horror films proliferate during bear markets, whereas upbeat, sweet-natured Disney movies show up during bull markets. Since the Dow has been in a bear-market rally for a year, now is not the time for horror films to dominate the movie theaters. But their time will come again.

In the meantime, to catch up on why all kinds of pop culture — including fashion, art, movies and music — can help to explain the markets, take a few minutes to read a piece calledPopular Culture and the Stock Market, which Bob Prechter wrote in 1985. Here’s an excerpt about horror movies as a sample.

* * * * *

From Popular Culture and the Stock Market by Bob Prechter

While musicals, adventures, and comedies weave into the pattern, one particularly clear example of correlation with the stock market is provided by horror movies. Horror movies descended upon the American scene in 1930-1933, the years the Dow Jones Industrials collapsed. Five classic horror films were all produced in less than three short years. Frankenstein and Dracula premiered in 1931, in the middle of the great bear market. Dr. Jekyll and Mr. Hyde played in 1932, the bear market bottom year and the only year that a horror film actor was ever granted an Oscar. The Mummy and King Kong hit the screen in 1933, on the double bottom. These are the classic horror films of all time, along with the new breed in the 1970s, and they all sold big. The message appeared to be that people had an inhuman, horrible side to them. Just to prove the vision correct, Hitler was placed in power in 1933 (an expression of the darkest public mood in decades) and fulfilled it. For thirteen years, lasting only slightly past the stock market bottom of 1942, films continued to feature Frankenstein monsters, vampires, werewolves and undead mummies. Ironically, Hollywood tried to introduce a new monster in 1935 during a bull market, but Werewolf of London was a flop. When film makers tried again in 1941, in the depths of a bear market, The Wolf Man was a smash hit.

Shortly after the bull market in stocks resumed in 1942, films abandoned dark, foreboding horror in the most sure-fire way: by laughing at it. When Abbott and Costello met Frankenstein, horror had no power. That decade treated moviegoers to patriotic war films and love themes. The 1950s gave us sci-fi adventures in a celebration of man’s abilities; all the while, the bull market in stocks raged on. The early 1960s introduced exciting James Bond adventures and happy musicals. The milder horror styles of the bull market years and the limited extent of their popularity stand in stark contrast to those of the bear market years.

Then a change hit. Just about the time the stock market was peaking, film makers became introspective, doubting and cynical. How far the change in cinematic mood had carried didn’t become fully clear until 1969-1970, when Night of the Living Dead and The Texas Chainsaw Massacre debuted. Just look at the chart of the Dow [not shown], and you’ll see the crash in mood that inspired those movies. The trend was set for the 1970s, as slice-and-dice horror hit the screen. There also appeared a rash of re-makes of the old Dracula and Frankenstein stories, but as a dominant theme, Frankenstein couldn’t cut it; we weren’t afraid of him any more.

Hollywood had to horrify us to satisfy us, and it did. The bloody slasher-on-the-loose movies were shocking versions of the ’30s’ monster shows, while the equally gory zombie films had a modern twist. In the 1930s, Dracula was a fitting allegory for the perceived fear of the day, that the aristocrat was sucking the blood of the common people. In the 1970s, horror was perpetrated by a group eating people alive, not an individual monster. An army of dead-but-moving flesh-eating zombies devouring every living person in sight was a fitting allegory for the new horror of the day, voracious government and the welfare state, and the pressures that most people felt as a result. The nature of late ’70s’ warfare ultimately reflected the mass-devouring visions, with the destruction of internal populations in Cambodia and China.

Learn what’s really behind trends in the stock market, music, fashion, movies and more… Read Robert Prechter’s Full 50-page Report, “Popular Culture and the Stock Market,” FREE

These markets continue to have unbelievable moves each day.  The S&P 500 re-tested the “flash crash” lows on Thursday and Friday, and after breaking below rallied back higher.

Last weeks analysis is still in play.  At the moment I don’t think there is much reason to be buying this market unless someone is unleveraged and buying for the very long term.  Current trend is down and for individual traders there is no point in fighting that.    Short-term traders that remain nimble in their position size likely continue to have a field day both long and short as the intra-day trends can be large in either direction.

Friday’s action does deserve a second look though; down aggressively early in the session and then very strong into the close.  We finished just below the half way point of Thursday’s action.  While it is not quite technically a Piercing Pattern (see: CandleStick Trading For Maximum Profits), Friday did significantly “pierce” into Thursday’s big slide.  This is a bullish pattern but while it may push prices higher early in the week, ultimately we need more confirmation than this to get bullish over the longer term.

Levels to watch at the start of the week include the Friday low at 1056  - a drop below will likely see further selling.

A rise above 1092 is likely to test the Thursday high around 1108.

Beyond these levels we are into the other support/resistance levels shown on the chart; all these points can be used as trading pivots.  Chart is below.

Cheers,

Cory Mitchell, CMT

I found this frank, straightforward, and “no B.S.” video presentation —-> It leads you to a TON of “dirt cheap” stock market training that will give you the upper hand when dealing with brokers… & a big edge over all the other frustrated & clueless “newbies” out there.

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S&P 500 Daily

A crazy week for stocks.  We saw moves in single days which normally take place in a week.  I put out multiple updates this past week simply because not having solid info heading into the next session could mean significant losses or missed opportunities.

For short term traders this was a fun week, but for longer term investors it may have been a more “interesting” time.  Thursday provided a bearish signal, which I posted about.  Friday saw the confirmation level (early in the session) and a strong down day (down 1.88% on the S&P 500).  We are back below the trendline (bearish) but bounced off a support level late in the day Friday.

Support (on the S&P 500) comes in at Friday’s low 1126 but really extends down 1122.  A break below this could see 1100 within the week, and given the volatility it could happen quickly.  The trend is down on the longer and shorter terms.  With the swing high recently put in and the sell off Thursday and Friday, a downtrend line can be put in to gauge pullbacks.  As long as those swing highs at 1174 stay in place this is a downtrend.

Support beyond 1122 comes in at 1093, followed by 1066, 1057 and 1044 if needed.

A rise above 1158 would be interesting (meaning I expect further downside before a rise to that level again)… but would be an early sign that there may be a few bulls still in the mix and retest of those swings highs at 1174 could occur.

Best wishes,

Cory Mitchell, CMT

~Know your risks.  Please see our Legal Disclaimer page.

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Here is a brief look at what we are watching for Friday.

EUR/USD down about 1% on Thursday.  S&P 500 down 1.21% Thursday.

EUR/USD update: The Euro stopped its decline almost exactly at 1.2520, at least so far. If the decline continues below the lows put in (approx 1.2517) then the target is 1.2480-1.2465.  Trend remains down on almost all time frames, although on some shorter time frames it is neutral until those lows mentioned are broken.  This would put all time frames into “down” mode.  Thus, this is important level to watch for short and longer term traders.

Minor resistance comes in at 1.2540-1.2550 followed by 1.2600-1.2610.

Stock Market / S&P 500 update:  With continued volatility the signals are coming in like they normally would over several days.  Based on the daily chart, yesterday I discussed the high of Wednesday being a critical level if we could stay above it… well we opened below and only briefly moved above it before falling dramatically towards the end of the day.  This is bearish.  The candle stick pattern is called a Bearish Harami.    If you pull up a daily candle chart of the SP-500 you will see today’s main candle body is contained within yesterday’s body, but today retraced a significant portion of it.  Confirmation of this pattern is suggested, and would come from a move below 1155 (as mentioned yesterday).  So our levels to watch remain the same as yesterday, we have just thrown in another piece of information.  While I say 1155 is the level to watch, a lot of technicians are watching 1150.  Thus 1155 may be early signal, and 1150 can be used for further confirmation or as another trigger point.  For additional price points to watch please see yesterday’s analysis here.

Cheers,

Cory Mitchell, CMT

~Know your risks.  Read our legal disclaimer page.

Looking for some further reading on the market?…

Prechter Describes The “Stunning Long-Term Elliott Wave Picture”

By Robert Folsom, Elliott Wave International

This would seem to paint a bullish picture: the stock market was in double-digit rally mode during 43% of the total calendar days in question [BUT!...]… Read more.

Yesterday I posted an analysis, and said that we had a potential bear set up, but the high and low of Tuesday would provide better indication.  Well, the market pulled out another strong day closing out above Tuesday’s high.  If we can hold that level it makes a test of 1182 very likely.  At the moment that is critical resistance.  A move through that level indicates probably one of the most violent and vicious bear traps (basically a false breakout to the downside) I have ever seen in my trading life.

Thus, a rise above 1182 has a target of 1200-1205.  If that is a taken out then the highs are likely to be tested.

On the downside, a reversal below Tuesday’s open and Wednesday’s low both right around 1155 would indicates bearishness once again.  The old trendline is also right in this region.  Support levels can be seen on the chart from yesterday.

On another note, I get a lot of emails from people who want to trade, but don’t have the capital to day or swing trade stocks or futures.  The answer I usually give is that one should make sure they approach the markets understanding one of the most common problems in trading is doing so when one is undercapitalized.  That said, we all start somewhere and there are alternatives in trading which are less capital intensive.  One broker I trade with offers trading in:

Tuesday closed out very near flat, indicating some indecision after the previous 3 very volatile sessions.  Tuesdays range was also well beyond average for the S&P 500.

Based on the daily chart we have a bearish set-up, yet ideally it is a two day pattern.  Wednesday will confirm with the high and low of Tuesday’s session providing signals.  A rise above 1170.50 is bullish and a close above it is a positive sign although a rise into the former range above 1182 (resistance) is needed to provide further optimism of a resumed upside move.  A move into this former range is likely to test the most recent swing high – rounded down to 1205.

On the other hand a move below 1148 is a bearish signal, with a close below this level indicating a likely further slide.  Nearest support is at 1135 and 1122.

At minimum technically damage has been done to the uptrend, although we have rallied back inside the dominant trendline which has been addressed in previous analyses.  The trendline, which was broken, runs right through the low of Tuesday’s session.  This old trendline is still relevant (see Dec ‘09 Stock & Commodities magazine for my article on this concept).

See chart below for additional horizontal support/resistance/signal areas.

Cheers,

Cory Mitchell, CMT

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S&P Daily, FreeStockCharts

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