Charted Waters

Last week started with a massive sell-off.  Each day thereafter saw the market pull back amid some nasty selling, only to see prices mount a strong rally into the close.  The Friday was the kicker.  But it took the bits and pieces of the three prior days of dip buying and brought it to a whole new level.

The good thing?  If you were long early on Friday, or even a little later on Friday, you went into the weekend with a big smile on your face.  This morning that smile is probably a little bigger, as stock futures continue to move higher off the Friday lows.

If you are bearish on this market, today is a good day too.  Prices for PUTs will drop after the open.  It's tough to argue with the price action last week.  There was obvious attempts all week to keep prices aloft, and finally on Friday the break through came.

If at first you don't succeed buy, buy, again.   Sure enough, on the fourth attempt the buyers succeeded.  The question now is will the buyers remain active, or is this another sell-able rip?

Let's go through a few charts.  For one S&P 500 futures remains unattractive in my view.  In spite of the massive recovery off the lows, we are still breaking down.  Absent a move over resistance, I think prices will start falling again.

You can see just how much further I think this rally has to go:

In my view this remains a relief rally.  Of course I'd be remiss to think this rally can't continue.  However it remains one built on the hopes of more central bank action or on Friday, inaction, as the jobs report put a nail in the rate hike coffin that we knew wasn't coming in 2015 or 2016 for that matter.  We will hear FED speak over the next few weeks still give a hint that a rate hike is coming... but again...

Actions Speak Louder Than Words.

The bond market isn't buying the rate hike talk.  You could argue a wonderful bull flag is nearing completion.  This could send the 20yr Treasury Bond etf $TLT through the $130 level again.

The U.S. Dollar Index looks ready to breakout.  With more Central Bank easing in Europe, and the Japanese hell bent on continues devaluation of the YEN the US Dollar looks ready to take its next leg up.

This will not be good for the stock market over the medium to long term, nor emerging markets for that matter.

$QQQ has seen the buyers keep it over $100.  But I think that level won't hold the next time around.  I'm trading for a move back to $92 in the short to medium term.  This hinges upon my bearish chart and economic perspective.



I remain bearish on this market.  For 6+ years we have been trending higher off the March 2009 lows.  The trend offers a great opinion on the market.  The trend is telling you the direction the market wants to go.  And in an uptrending market there is a better chance stocks go up than down.  It's that simple.  I think that trend is over.  I don't have the time machine to see where this market will be 6 months from now or one year.  But I do see a market struggling to hold gains.  A market filled with uncertainty.  Out of an uncertain market comes massive spikes to the upside that try to offer hope that the former weakness is done.  I don't think it is.  I think this market is going to inflict a lot more downside over the next few months.  I've seen a lot of talk to the contrary.  'The Bottom is In'  - 'Seasonality is in the bulls favor'.    Just like each FED meeting or Jobs report is the biggest one we've ever had.... I think this week is a big, big week for the market.  I think the sellers will return and will happily be doing so from higher prices.

See you in the chat room!



Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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