Equities, Cardinal Moon of January 26th
Daily and Weekly Breadth Summation index (BSI)
Last week I expected to close the week lower with the worst late in the week and the low was Thursday. This week I expect a negative week as well with a possible deep sell-off to the November lows by Friday January 23rd for the Cardinal New Moon of January 26th. The less likely alternative is for the SPX to hold above 800 on Tuesday's expected low and rally Wednesday and Friday into SPX 880 to 900 for a New Moon high near January 26th.
I am currently long QID, UDN, DBC and SLV into May 09 except for QID
I will add more QID if the SPX goes to 880 and 900 to bring my cost down
I am also long QLD and SDS until May 09 for my Market Neutral system
My recent performance at predicting the direction of the SPX before the open is listed below and unless I am too cautious and skip voting, my vote for Tuesday is Bearish but cautious
Firebird - Your Score: 61.5% [G100
(last 22 sessions: corrects=8, incorrect=5, missed over limit=0)
The Next Day BSI is 60% Bearish for Tuesday but too low to be reliable.
The Daily BSI is getting overbought and suggests a pull back in a day or two.
The Weekly BSI is oversold but is still too low to confirm a change of trend.
Introduction to Using the Charts
Many of the methods used in the charts discussed below are explained briefly here.
Live Intraday Charts
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New Moon of January 26th is a Cardinal Moon
New Moons are statistically highs but the Full Moon low of January 10th failed, and that is bearish as can be seen when the November 13th Full Moon low failed and led to a panic sell-off low three days before the next New Moon. A low three days before a New Moon is a classic New Moon Panic signature, and many cycles, astrological and overbought conditions are suggesting that a Panic low near Friday January 23rd is probable. The unlikely alternative is for the current rebound to finally exhaust itself near SPX 900 by Monday January 26th, and turn this New Moon into a very good selling opportunity.
Outlook for Tuesday is bullish to mixed
All three indicators have trended into the bullish zone and may not be low enough to reverse yet, but any further Obama rally Tuesday morning should be enough to take them there. The blue Put/Call line completed what appears to be 5 waves highlighted in blue, confirming the count in the possible ending diagonal triangle which gave us a sharp rebound as it usually does. We have already reached the first resistance of 860 in a probable Wave A and will likely reach the 870 area where wave C = wave A on Tuesday. See the NDX minute chart here and the Dow minute chart here.
Outlook for next week is mixed
All three indicators are turning a bit bullish but have not broken their bearish trend yet, and Price, PPO and StochRSI are all still below resistance leaving the picture mixed. The 15 trading day cycle low is due at the open on Wednesday after Inauguration day and suggests weakness on Tuesday and probable strength on Wednesday. The rest of the week is uncertain since the 15 and 30 TD cycles are heading in opposite direction and it is unknown which will be the dominant cycle. See the NDX 15 minute chart here and the Dow 15 minute chart here.
Outlook for late January is mixed
The blue Put/Call and white Tick lines are turning a bit bullish near the middle line, but like the PPO and StochRSI, they remain below resistance for now. The 7, 9 and 11 month cycle series all seem to suggest a low in late January and even later in February so the white Tick and blue Put/Call lines may need to go further into oversold before me make a good low. See the Nasdaq hourly chart here and the Dow hourly chart here.
Elliot Wave suggests a Minor Wave 5 down into February
I often use sentiment indicators like the Put/Call ratio to confirm price counts since they will only differ in the internal divisions and always match the price count at major turning points. From the October 07 high the blue Put/Call line has traced a clear 5 waves into the March 08 low to complete wave 1. The correction into the May 08 high completed wave 2, but the decline into the October 10th low only completed minor wave 3 of 3 and it appears minor wave 4 is complete and we have started minor wave 5. The potential Head and Shoulder formation in the Put/Call line is bearish and the angle of descent is similar to previous declines and suggest we could hit the first support level by the end of January and the next ones by mid February.
Ticks are turning bullish near support
The Ticks are turning bullish near the early December low levels, but the Nyse Tick is weaker and we may not have seen the final low yet.
The Put/Call ratio is turning bullish again
The Put/Call ratio is turning bullish again but it may be a false start, since even if the blue line breaks the trend line, it would become overbought within a few days. This was expiration week with possibly skewed P/C ratios, but it seems every little turn up generates too much call buying for a rally to get very far before it gets overbought.
The Volatility turned Bullish
Both the VIX and QQV have turned bullish for now, but their break out of an ending diagonal triangle is suggesting a more significant change of trend than we have seen. See the Nasdaq QQV chart here.
The McClellans are turning Bullish near cycle date
The McClellans oscillators turned bullish a day late from the January 14th cycle date, but the turn down in the white McClellan Summation suggests further declines after this rebound ends.
Stocks above their 50 and 200 day MA are Bearish but stalling
The percent of stocks above their 50 and 200 day MA are still bearish but showing signs of turning.
The 3 month Yield still fearful but shows signs of turning
The 3 month yield is still showing a lot of fear near 0.1% and we need to see this rise significantly above 1.0% to signal a return to more normal credit conditions and the possibility of a lasting Equities rally.
30 year Yield should drop some more into cycle dates
The 30 year Yield fell to first support from the 3.2% resistance and cycle date of January 7th and will probably drop some more into the January 23rd Cardinal New Moon and into February.
Bonds hold above strong support
Bonds held above a number of converging support lines near 133 with PPO and StochRSI also reaching natural support levels suggesting a move higher into the expected cycle high of the Cardinal New Moon of January 26th.
The US Dollar should resume decline soon
The US Dollar is struggling in the third advance from the December 17th low, but managed to break the downtrend briefly and reach the 0.85 resistance area and will probably head lower into the January 26th Cardinal New Moon cycle date and into February.
The US Dollar makes a significant top
The USD has retraced much of the sharp decline in five overlapping waves that indicate a weak trend. The cycles suggest the convergence of resistance lines near 0.85 should be enough to send the USD lower towards the expected 6.5 month PI cycle low of April 2nd.
The Yen is struggling near the highs
The Yen is starting to show divergences on this move up from the January 6th low, and will likely test support near 104 or even 100 in February before the next probable Wave 5 up starts. This move up in the Yen is normally bearish for stocks as appetite for risk goes down with the carry trade as the Yen rallies.
The Yen may have completed Wave 3
The Yen made a new high in December 08 that left a second overbought spike suggesting we may have started a Wave 4 correction that should take us to strong support near 103 before resuming the rally higher.
The Loonie pulls back sharply from overbought
The Canadian Dollar fell hard to support near 0.80 and will likely test the 0.80 to 0.82 area into the January 23rd cycle date before heading higher for the expected 4.5 month cycle high of early February.
The Canadian Dollar should rise into May 09
The CDN Dollar made slightly new lows with improving PPO and StochRSI divergences that suggests a move higher into the next 9 and 18 month cycle highs of March and May 09. A rising Loonie is usually a sign of Commodities and Gold strength going forward.
Commodities holding lows on divergences
Commodities lost 20 year support near 240-250 and made a lower low with a higher PPO and StochRSI divergence suggesting we will probably test the 20 year resistance level near 250 or more by the February 6th cycle date.
CRB should rebound into 7 month cycle high
Commodities are very oversold after 6 months of continuous selling and will likely rebound to test the 20 year support/resistance level near 250 or more by the next 7 month cycle high of February 6th.
Oil is in a potential Head and Shoulders pattern
Oil pulled back just below support after testing the key 50 level and has left a potential inverse Head and Shoulders pattern with stronger PPO and StochRSI on the right side suggesting a move higher for the expected February 6th cycle high.
Oil near 5.5 and 11 month cycle lows
Oil is approaching the 5.5 and 11 month cycle lows and will likely move up sharply into the next cycle high of March 23rd and a move back above the key 40 level would suggest it has already started.
Oil near 5 year cycle low
Oil fell hard to the 1990 and 2000 highs near 40 for the 5 year cycle low of December 08 and has raised doubts on how high the next rally can get for the 5 year cycle high of September 2010.
Gold now below its 200 day MA and the 1980 high near 850
Gold continues to consolidate around the 1980 high and 200 day MA near 850 and will probably continue a bit lower into the cycle date of January 23rd before it heads higher to finish Wave 1 near the February 6th cycle date.
Gold is probably headed for a May 2009 high
Gold will probably complete Wave 1 by the February 6th cycle high date and should pull back into March before heading higher in a powerful and most profitable Wave 3 into May 09.
Silver holding the 10 level but still overbought
Silver bounced back for the second time from the 10 level and needs to climb a lot more to the 14 level by the expected cycle high of February 6th, or late February pull back could take it back below the 10 level.
Silver has greater potential into May 09
The correction in Silver was more severe than Gold and the potential for recovery profits are greater since Silver should reach at least the 14 level and probably more by the next 14 month cycle high in late May. The COT's are also showing a configuration seen near previous lows.