Saturday, January 23, 2016

Don't be Fooled

The bottom fell out on Wednesday when the SPX dropped to $1812, just passed the $1820 support level we mentioned last week.  From there, it had a nice recovery to finish the week at $1906.  Let's take a look at a few charts and determine if the rebound will continue or if this is just a dead cat bounce.

Our daily SPX chart shows the recovery that was made after the severe drop.  We can also see some resistance around $1920 and $2000.  




The weekly SPX shows after a crazy week we are in a very similar situation as we were last week.



Although the daily BPSPX is showing a rebound, the 200, 50 and 30 MAs are in bad shape.


Finally, the weekly BPSPX.  As with the weekly SPX chart, this clearly shows the rebound means nothing right now.



Although, the daily charts are showing a reversal of the downtrend, the weekly charts have not changed.  The risk of more downside is extremely high and now is not the time to risk getting back in.

We would not be surprised by one or two up days next week before the downtrend continues.  We expect the $1820 level to be tested again.

  • 401K/IRA
    • If still invested... tough choice here.  For passive investors, get out now... for aggressive investors, it may be worth staying invested and play for the recovery.
    • If you're in cash, stay on the sidelines as some whipsaw action is to be expected this week.  There will be plenty of time to get in later.
  • Stocks/ETFs
    • Run scans and start looking to invest in strong patterns.  Do not forget to have a STOP LIMIT for open positions.

Sunday, January 17, 2016

Is That a Bear?

Last week was not a good week for the markets.  As we mentioned, our thought was the downtrend had started and the stock markets would drop further.  Let's review a few charts and see what happened.  Can we determine if the trend will continue down?

The daily BPXPX has continued it's path straight down. It's well below the 200, 50, and 30 MAs.  It's been a consistent drop since the start of the new year.



The weekly BPSPX is showing a similar pattern as the daily, except the RSI and MACD show we are in an earlier stage than many people might assume.  Could this lead to a further drop?




The daily SPX is at support going back to September and August.  We could see a bounce as we did back in October and August. If it falls through support... well, it's not good... take a look at the weekly below.



On the weekly SPX, it's easy to see the next support is around 1820 and then 1770.



We follow trends and according to the charts above, the trend is down.  We would not be surprised by a minor rebound this week, but more downside will likely follow.  Over the next few weeks, maybe couple of months, expect a further drop.

  • 401K/IRA
    • If still invested, get out now!
    • If you're in cash then stay on the sidelines and wait for something to develop.
  • Stocks/ETFs
    • Only invest in VERY strong patterns.  Do not forget to have a STOP LIMIT for open positions.
To answer our blog title; yes, we believe we are in a bear market.

Saturday, January 9, 2016

Down She Goes

The market took a big hit this week with the S&P 500 losing 5.86%.  Luckily, we were in cash watching everything from the sidelines.  A place we plan to stay this week.

The 42MA, once again, proved to be key in this weeks drop. The prior three weeks, the S&P 500 would sneak above before closing at or below.  This week, it never touched 42MA, which was our first clue we were in for a drop.

The big questions are, will this be the start of something bigger or will we bounce back similar to the past couple of years?  Our plan is to stay out of the stock market until it can close above the 10MA.  We will then reevaluate and possible dip our toes in the water.

If we had to make a prediction, we are expecting the decline to continue all the way to $1850, followed by $1811.  If you're 401k is invested, there's still time to get out.  Don't wait for a bounce, which may or may not come.


  • 401K/IRA
    • If still invested, get out now!
    • If you're in cash then stay on the sidelines and wait for something to develop.
  • Stocks/ETFs
    • Only invest in VERY strong patterns.  Do not forget to have a STOP LIMIT for open positions.

Sunday, January 3, 2016

Stuck in the mud...

As we start 2016, the market is in and has been stuck in a range for the past 3 months. If you go back to the start of 2015, it's been stuck in a similar range for the past year - besides a small downswing in late August that it recovered from. This makes our job hard, as we are not trying to predict what the market will; instead we are trying to follow the trends. If there is no trend, it becomes difficult to make any money trading the indexes.

With that said, one significant event has taken place that may give us a clue of what the next trend will be. The S&P 500 has dipped below its 42 day MA on the weekly chart a few different times since November 13th. It recovered a couple of time to take a peak back above it before falling again. It took another look above this past week before settling below.

As of now, the S&P 500 sits below its weekly 42 MA, below the weekly 10 MA and just slightly above the weekly 18 MA. This should make you think twice before entering in your 401k right now. It should also make you think about exiting if you are still in your 401k. If you do stay in, it would be wise to exit if it drops below the 18 MA.


  • 401K/IRA
    • If still invested, look to get out if the S&P drops below its weekly 18 MA. 
    • If you're in cash then stay on the sidelines and wait for something to develop.
  • Stocks/ETFs
    • Only invest in strong patterns.  Do not forget to have a STOP LIMIT for open positions.