6 Primary US Equity Markets
First profiled within “Comparing the 6 Primary US Equity Markets, VIX Fibonacci Cycles and the US Dollar at a Critical Juncture”, on 11.10.09, below is an updated snapshot that highlights how the six primary US equity indices have performed relative to each other since their March lows via a percent change chart. Please click on any picture below to see a larger version in crystal clear detail.
We found that:
1) the Russell 2000 outperformed the other key US equity indices since their collective March lows;
2) the Russell 2K had severely underperformed its peers over the recent days;
3) the Russell appeared to be topping out and about to retire its lead of the collective march higher.
Just a few days later on November 12th, the Russell (RUT) suffered the very first chink in its armor as both the NASDAQ Composite and NASDAQ-100 outperformed it for a brief period of two days. And while the RUT has recently returned to outperforming its peers, resuming almost uniform ‘order’ between indices, the very next 2-3 day sustained crossover ought to make bulls and bears alike stand up and take analytic notice. As we detailed within “Technical Profiles of 8 Key Stocks” on 11.12.09, during a topping process of Primary degree (think annual) small caps begin to fade away as breadth markedly narrows and the herd piles into the alleged “safety” of blue chips within the final upward subdivisions of concurrent cyclic peaks.
Robust Fibonacci Moving Averages
Below is a daily ‘candlestick with trend’ chart of the NASDAQ Composite overlaid with only a Fibonacci sequence of Simple Moving Averages (SMAs) whose series runs consecutively from 8 to 6765. We have labeled the individual SMA values that are most pertinent today; if you are of a technical persuasion, see if you can label the remaining SMA values.
Long-term Fibonacci moving average values (the actual lines) provide not only solid long-term resistance/ support levels but also exhibit the distinct habit of marking extremely significant turning points, or inflections, across all financial markets. Within the chart below, the low of 1265.52 on 3/09/09 held above the support provided by the daily 6765 SMA at 1264.05 by approximately 0.12%, which is certainly noteworthy.
The sharp double zigzag structural formation of Primary wave 2 (circle) has carried itself up into a confluence of long-term Fib SMAs with the daily 987 SMA at 2,211 and the daily 2854 SMA at 2,226. The recent swing high at 2,205 (11/16/09) fell just short of these important levels as the COMP attempts to either pause before pushing slightly higher or simply coils further at these levels as it continues the daily/ weekly process of rounding out a significant upper price extreme.
After the low-volume, steady sell-off seen at the end of last week, the NASDAQ Composite now rests just above a very powerful confluence of short/ intermediate-term Fibonacci SMAs whose slopes have begun to “sync up.” Anecdotally, this type of synchronization can provide either a trampoline-like bounce when met forcefully from above or a coffin-like ceiling when merely scratched at from below. With a decent opening gap higher Monday morning, it will be important to see whether the COMP musters the strength to avoid forming a possible H&S or a rolling quad top. After having run in place for almost two months now with little upward gain to show for it, this week’s extremely positive seasonality simply must put on a good show and help pump the COMP and the Nazzie (NDX-100) higher into the holidays. We just hope that the PPT and B-team squads manning the GSCO, GETCO and FIDO turrets play like Peyton this year instead of his little brother E-Cry … and do a slightly less ridiculous job than last year’s debacle.
One year ago, on 11/24/08, the S&P 500 cash (INX) opened at 801.20 and closed at 896.24 on 11/28/08; recording a massively outsized 11.86% weekly gain on the single largest weekly Marubozu candle that this technician can recall without searching through TradeStation. The next trading day, 12/01/08, registered a massive bearish daily Marubozu candle on the black-eyed S&P’s, which opened at 881.61 and simply crashed 8.93% into its close at 816.21. Interestingly enough, this single session crash was eight TD’s (trading days) prior to the Madoff sons' public admission of their unparalleled improprieties. This weekend we will detail possible patterns of alternation within “news” surrounding both Madoff and Buffett in a piece entitled “Alternating Weekends at Bernie’s & Buffett’s.”
The snapshot below shows how Friday’s low held just above the tightly wound 21, 34, 55, 610 and 1597 SMAs. When multiple MAs ‘sync up’ on top of each other, they often establish a zone of support or resistance that is incredibly difficult to penetrate. Two consecutive closes below the lateral band of support that spans 2126 – 2135 (likely either later in the week or the tail end of next), will be a strong indication that a bearish trend is emerging, especially since the SMAs appear to be moving sideways and it won’t take much for them to begin sloping downward.
Has the Reflex Rally Reached Resistance?
The INX, or S&P Cash Index, has been trending beautifully both to the upside and the downside since the end of September. The two snapshots below show the INX hourly overlaid with our proprietary Spectra-Trader™ (diagnoses trend direction and strength) along with FIBs™ (Bollinger Bands which establish support, resistance & breakout levels) and Trend-Squeeze™ (highlights extreme contractions in average true range (ATR) and short-term volatility, which typically precede impulsive thrusts in price action).
As you can see, when the price bars are Green and price itself is above the Upper Green FIB, the market tends to rally with bullish conviction. Similarly, when the price bars are Red and price itself is below the Lower Red FIB, the market tends to sell off with bearish conviction. The end of last week capped a strong 2-week rally as Spectra-Trader™ established a bearish prognosis; however, price failed to take out the last swing low at 1084.90. As long as price holds above this level (and based upon the character of previous fourth waves of two different degrees), there should be a sharp upside relief rally back into the 1105-1115 area where resistance will be intense. A small Gann angle line surrounds 1101 on the S&P futures (continuous contract @ ES, current basis December, ESZ09) and a confluence of retracement targets and real candlestick bodies for various interval periods surrounds 1104 – 1106.
Equity markets have reached an ominous juncture of time, price and sentiment over the past week as we roll into pre-Thanksgiving seasonality, in which equity markets enjoy their single greatest bullish cyclical tendency across any such weekly interval period. While we at Fibozachi read the tea leaves of the weekly charts as being bearish, the hourly’s ought to experience some immediate upside relief early in the week. We will be closely watching the market internals (TICK, ADD, VOLD and VIX) across interval periods of 1 and 5 minutes. Once the initial move higher exhausts itself, we will be paying extremely close attention to volume this week, which has been running considerably below average of late as we enter what is typically a low volume markup week into the end of many institutional calendars.
Dow Jones Industrial Average:
Has the Reflex Rally Reached Resistance?
The chart below shows the DJIA coming into the single most bearish bullet of classical technical analysis: the trendline that connects the 10/11/07 all-time high with the 5/19/08 upper price extreme of Intermediate wave (2) of Primary wave 1 (circle). Employing linear scaling, the DJIA failed to close over this key trendline during the sideways price action of last week. Interestingly, the slope of this key trendline is so sharp that by Thanksgiving it will already be lower than last week’s high of 10438. It is highly unlikely that after such an exhaustive 8 ½ month rally, the DJIA would pop this trendline and follow through with a breakout to the upside. Moreover, without confirmation from the Trannies (DJ-20) and DJ-65 Composite, should the bullish Thanksgiving seasonality take out this trendline along with last week’s highs, then we would anticipate only a small spurt higher into the area surrounding 10460 – 10828.
We at Fibozachi will be patiently waiting for Spectra-Trader™ to register a confirmed sell-signal (two consecutive red bars with lower closes) on the DJIA for confirmation of an emerging bearish trend. As you can see below, the only previous sell signal registered back in June; accurately anticipating the onset of corrective wave (X) within the impulsive double zigzag formation that comprises Primary wave 2 (circle), which remains the only significant pullback since the March lows.
Wilshire 5000 Candlestick Patterns & EMA Resistance:
Hangin' some Men
Below is a daily snapshot of the DWC, the Dow Jones Wilshire 5000, which is undoubtedly the most comprehensive measure of cumulative breadth across US equities. Our Candlestick X-Ray™ Scanner managed to catch the back-to-back Hanging Man candlestick patterns that plotted during the middle of last week, which flashed a doubly bearish warning signal to further examine the possibility of an immediate down move. While still too soon to call, it would certainly seem fitting to look back down the road and see that the single most comprehensive measure of breadth across US equities registered such a telltale candlestick pattern, twice, at its very peak.
Taking a last look at Fibonacci moving averages … below is a weekly chart of the DWC (Wilshire 5K) that shows four distinct failures to close above the weekly 144 EMA, which currently sits at 11,324. While we at Fibozachi do not become overly entangled within the coincident and lagging indicants of moving average methodologies, we do find great predictive value when a specific long-term MA value is repeatedly kissed intra-bar yet continuously rebuffs price action by its close. Last week plotted a borderline Gravestone Doji pattern that decisively popped the weekly 144 EMA on an intra-bar basis but closed well below it; further underscoring just how important the ‘market’ itself believes this specific moving average value to be. Based on the Fibonacci EMAs highlighted below, a move above 11,324 ought to carry towards 11,700 whereas the critical support zone that surrounds 10,350 will be the last level to go before the floor falls out and the support surrounding a swing low at 9000 is swiftly tested.
As always, we hope that this quick overview is helpful and thank you for taking the time to read our thoughts.
Disclosure: long ESZ09 intra-session; anticipate becoming long the $DXY US Dollar Index via DX futures and short ESZ09 once a multiple confluence of proper trading signals confirm themselves
For similar technical takes, market calls and insights, please visit our brand new website, www.fibozachi.com. There, you can view both our complete body of analytic work as well as detailed explanations of the unique design development and technical methodologies within the proprietary technical indicator packages that we use daily to perform a comprehensive technical analysis of stocks, options, ETFs, futures and FOREX across interval periods of time, tick and volume.