Thursday 12 April 2012

The Rainbow Indexes - all set to go Bullish

There is a time for simplicity, no trend channels, no support/ 'target zones'.

The Elder Impulse charts I have to come to make use of only relatively recently.

*the following charts do still have EMAs, I suppose I could have removed those too, but..regardless..lets see where we are across 6 main indexes...

IWM (Rus'2000 small cap), daily

Dow, daily

Transport, daily

SP' daily

NASDAQ, daily

NYSE Comp, daily


The transports was the only index to get a confirmed trend change today, and is now arguably issuing an outright 'No shorts, be LONG' signal.

I would believe its fair to assume, that even if the indexes are flat or a touch lower tomorrow (no more than -0.25/0.35%) that we'll see the other 5 charts also provide a green candle for the Friday close. That would set up for a further move higher next Monday/Tuesday. I'd guess that Wed-Friday might easily be a consolidation phase as we have OPEX next Friday. Whether we fall after opex...well, lets get next week out of the way first.

Keeping it simple

There are endless issues right now, especially on the broader weekly and monthly cycles, but I think its important to have highlighted this simplified view of things. There is a time for oscillators, and all the other chart-indicators, but right now..I think the above 6 charts tell the story that needs to be told.

Closing Brief

A very strong day for the bulls. They got the follow-through they desperately needed. Although its improtant to note we are still yet to break out of the danger zone. Only a few closes above 1405/10 can the bulls start to feel confident again.




VIX closed very poorly for the bears, arguably the last line is 16.75 tomorrow/Friday.

SP' closed at what many would call overbought..but we can still get one or two more up days before we need to level out for a few days.

*GOOG earnings were slightly better than expected, they are also doing a 2 for 1 stock split.

Much more later...especially on the Metals, and the bigger cycles on the indexes.

2pm Update - IWM/Rus'2000 index

The Rus'2000 index is having a strong day..leading the way once again.


The bears have two clear lines to defend.
1. The 10MA at 81.50 - which we'll probably test Friday or Monday
2. The back-test of the October up trend...which will be around 83.50/84 next week

Clearly IWM above 85 would invalidate ALL bearish talk/outlooks,and then the door is open again for a move to 90..even 100 later in the summer.

Quick look at iwm 60min cycle

83.00 sometime early next week looks very viable - that would equate to sp'1410  -which would very much kick out almost every bear who has recently been adding new short positions.

More after the close.

12pm Update

Bulls need to PUSH PUSH PUSH. They can't let the rally slip back and reverse, or we'd be looking at a very strong reversal. So long as we remain broadly above the 10MA on the hourly cycles...the recovery is on track. Primary target would be 1395/1405 tomorrow..or early Monday. Whether we can go any higher than that....we'll just have to wait.

*Google earnings at the close..and JPM/WFC tomorrow morning.


Transport, daily, rainbow chart


Bears are clearly on the run...and as noted earlier, no one should be short right now. The fact the Transports are already showing a green candle on the rainbow chart.. that is a VERY big warning to the bears. Just 1 more up day..and we've got a real trend underway.

In the very near term...trend is up - and the daily cycles certainly support that. The monthly cycles are still a real problem though..more on that later though...after the close.

10am Update

The bounce continues - as expected.

The question far? Considering the daily cycle - as noted last night, its VERY viable for the market to cycle upward for the next 5-7 trading days all the way into opex next Friday.

A bearish scenario would be that market at least moves no higher than the recent high of 1422..or preferably 1395/1405. That would be a nice lower high..and would be a fine set up for a major wave'3 after opex.

The bullish scenario needs to get Sp' back above 1400 quickly. It is arguably VERY important we stay above the 10MA on the hourly charts. Its acceptable to briefly go below the 10MA, but generally, anyone day/swing trading in a Long position, would have a stop just below the 10MA.



Only a maniac would be adding..or holding to short positions right now.

Arguably, any new/existing long positions should have a 'get outta there!' stop around the sp'1365 level. As always, it depends on how flexible you wish to be..and we all know the algo-bots love to do stop-sweeps to kick traders out, in order to churn/create market volume.

*I hope these intra-day updates are of use this week. Good wishes for your trading day!

More later in the day.

Silver/Gold morning briefing

Good morning, a quick look at the two shiny metals.

Both Precious metals remain weak, on a daily, weekly, and monthly cycle. The 5-10 year up trend is of course still massively bullish, but the last year has been rough for those who bought near the highs.

SLV, daily

GLD, daily


Silver MUST hold $30..or there will be real trouble. Gold is still stronger, but is also still in a broad downward channel.

*considering the weakness in Copper (see previous post)...if I had to guess...I'd say Silver will snap through $30 within the next 1-4 trading days, and take Gold down with it.

Commodities - Bearish

Commodities seem to be leading the equity market by a week or two lately, they were certainly warning of problems last week - whilst SP' was making a new high at 1422.

First, lets look at the CRB

CRB, weekly, 6yr historic

We have broken below what was indeed probably a bear flag..and now the next major target is the support level at 290.

*if 290 fails to hold..then its highly probable we'll quickly drop to 250. That's 40pts..around 15%. Would it be a bold step to suggest that would knock off 10% (at least) from the main equity indexes, giving us sp'1250 ?

CRX, weekly

The CRX is a commodity stock-related index. Take a look at the mining or some of the Oil/Gas sector lately, many of them have been smashed down. The CRX broke a major trend support just over 2 weeks ago. The next major support is 800 (5% lower)...if that fails..then the next primary bear target would be 690 - a further 15% lower - this would arguably suggest sp'1150 sometime 'soon'.

Lastly this evening, Metals..lets look at Copper

Copper, weekly

The bearish count on this chart is very preliminary. It assumes a major cycle high occurred in February 2011. We have seen a bullish pennant the downside! This was very surprising, and bodes VERY badly for the main markets.

From a cycle perspective, just look at the MACD (blue bar histogram)..we are due to go negative cycle NEXT week. So..further declines in Copper, and the wider commodity/equity market would be the default viewpoint.

So...whilst I earlier posted near term index cycles that do suggest a number of days upside, I am trying to keep in mind that commodities are flashing major warnings - and have been for a number of weeks.

This is an especially tricky time to trade. The ultimate question remains...was Sp'1422 the top?