Piker Trader

An update to Tuesday post. 

NYTV

NYMO:

For once the market closed down today, a whopping .10%.  Call your broker and get out, the market is crashing!!!!!!!

1120 provided the first real resistance level of the recent rally, giving the bears a one day victory. The 1112 level is providing a tiny bit of support for the market but if this breaks, the next support lies at the 200 EMA and the 1090's.  If the computers, break 1120 then 1140 is very likely more 1150 is not out of the question.  I still stand that this market is overbought and needs to come back to the 1090 level. Of course this can be very wrong and news can come out that the GDP is -4% and the market can rally. 

There was some weakness in other sectors today with only two sectors holding this market up and ulities are seen as defensive stock plays, finanicals were up only due to European banks.

Oil was down considerable today which tends to lead the market, along with Copper and Goldman. 

Overbought and Oversold are terms commonly thrown around by market participants, but yet each person has a different definition of overbought and oversold.  The most common definition of OB or OS comes from the Stochastic indicator.  With anything above 80 as overbought and below 20 as oversold.  This indicator can give false signals though and most of the time each stock has it's own number above 80 which represents overbought.  Oscillators are good to determine if an individual stock is overbought or oversold, but to determine if the overall market is oversold one must look at different indicators. 

The first indicator to look at is the volume of the market.  The below chart is the NY Up Volume to Total Volume ratio, with a 8 day ema on it.  Notice when the 8 day ema moves above the HL the market tends to decline.  The line represents the amount of up volume to the overall volume has reached a peak and there is to much buying going on. 

Another indicator to look at it is NYMO, NYMO closed on Friday with a reading above 79 which is very high for this indicator.  NYMO is at an extreme level and the last time it was at this level the market sold off.  When NYMO gets to these extreme the market tends to move lower as well. Of course this isn't 100% accurate since there was another month long rally on a NYMO that was near these levels.

Of course an OB or OS condition isn't 100% accurate as buy or sell signals because of course there is the old saying "A market can stay overbought and oversold longer then you can stay solvent".  Noticing an OB or OS market allows a trader to plan accordingly. 

There has been a lot of talk lately by the infamous "Death Cross", yet many times it has given few a fake signals.  Here is a much more accurate death cross, it is using the 70 ema and the 230 ema.  Using these moving averages it elimnates the fake outs and provides a clean sell signal, it has yet to cross.

Just two charts today the first shows SPX testing it down trendline.

And here is the daily, the channel is now broken and the market closed up above its 50 and 200 ema, but right against the trend line.  Right now its a crap shoot.  This whole thing really looks to similar to last July when the market ran up and up, after a failed H&S.  The bulls have the intermediate term trend and one has to respect that.  The bears would need to break 1070 to regain control, while the bulls would 1100 to break to really start another leg of buying.

This is the last post for the week as it is time to take a little break from the markets.  Check out PikerCharts for the updated charts.