DJIA made a new 6-week low, approaching key support at 15704

DJIA extended the decline off Tue’s 15946 high to break below Monday’s 15784 low, confirming a lower high at the former. With the daily MACD/Stochastics still weakening, further losses remains favored to retest the 15704 reaction low (12 Dec), near the 15710 prior peak (18 Sep) and 50% retracement of the 14719/16588 upleg. Below there would open the support cluster including15522 range low (5 Nov), the 200 day moving average (black line) and 61.8% retracement of the 14719/16588 rise.

However, an upside reversal above 15946 would delay bears and open 16141 (23 Jan low), relieving the oversold condition. Only clearing the falling 50 day moving average (brown line)/16241 (13 Jan low) strong resistance area would improve the outlook and stabilize for 16521 (21 Jan high). 

 

Resistance:

*** 16588 (31 Dec record high)

**16521 (21 Jan high)

**16241 (23 Jan swing low)

**16141 (23 Jan swing low) near the 50 day moving average (brown line.)

*15946 (28 Jan high)

 

Support:

***15704 (12 Dec reaction low)/15710 (18 Sep peak), near 50% of the 14719/16588 upleg

*15522 (5 Nov low), near 61.8% of the 14719/16588 upleg and 200 day moving average (black line)

 

 

***very very strong level**very strong*strong

Apple (AAPL): Bearish rising wedge breakdown; points lower towards $400

S&P 500 Futures (H4): Double top continues to weigh; Retest of key 1754.4 level is likely

SP 500 futures (H4) confirmed a 5-week double top at 1846.5/1845.3 on the break below the 1809.8 low. Bears extended the drop from last Friday’s 1827.7 high to Monday’s 1767.0 low before consolidating. With the daily MACD and other studies still negative, a swing high remains favored under the resistance cluster including 1809.8 , 50% retracement of the 1845.3/1767.0 drop and the 50 day moving average (blue line.) A break below 1767.0 would resume the downleg towards the 1754.4/1738.1 support zone (16 Dec/7 Nov lows) which may contain losses. 

It would take renewed strength back above the 1809.8 resistance cluster to stabilize and reopen the 1846.5/1845.3 double top area.

 Resistance:

***1805.5/1806.0 (29 Nov/18 Dec range highs)

**1809.8 (13 Jan swing low) near 50% retracement of the 1845.3/1767.0 drop and the 50 day moving average (blue line.);

*1846.5/1845.3 (31 Dec/15 Jan highs);

 Support:

***1754.4 (16 Dec reaction low)

*1738.1 (7 Nov swing low)

*1716.5 (19 Sep high)

 

***very very strong level**very strong*strong

SPY confirms a double top at 184.69/184.94; Looks to retest 177.64/177.51/177.32 key support zone near 38.2% retrace and bull trendline

SPY (SPDR S&P 500 ETF Trust) ($178.89)

January 26, 2014

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SPY confirms a double top at 184.69/184.94;

181.75/181.66/181.34 reverts to resistance area;

Looks to retest 177.64/177.51/177.32 key support zone near 38.2% retrace and bull trendline

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SPY:  Confirmed a double top at 184.69/184.94 on the break below 181.31 range support on Friday; the 181.75/181.73/181.34/181.66 now reverts to resistance area. Weakening momentum and bearish divergence both point lower. Bears look to retest the cluster of supports including 178.08 double top target (not shown, 184.94/181.34 from 181.66), 177.32 (12/18/13 reaction low), 38.2% of the upmove from 10/9/13 low (164.53/184.94 rise), 100 day moving average at 176.38, and 14-month bull trendline from November 2012 low (connects 11/16/12 and 10/9/13 lows) and 50% of the 164.53/184.94 rise, which should hold.

If SPY bounces off the support zone, that would prolong the consolidation and reopen the 181.75 (11/29/13 range high/181.66 (1/24 daily high-gap low)/181.34 (1/13 range low) short-term resistance area.

If SPY decisively breaks below the support zone, medium-term supports rest at 173.60 (9/19/13 high) near 23.6% of the entire upleg from 11/12/16/12 low (134.70/184.94), 170.97 (8/2/13 high) /169.07 (5/22/13 high) near 50% of the upmove from 6/24/13 low (155.73/184.94) and the 200 day moving average.

Long-term supports lie at 164.53 (10/9/13 higher low) near 38.2% of entire upleg from 11/12/16/12 low (134.70/184.94) and 159.71 (4/11/13 high)/160.22 (7/3/13 low) near 50% of entire upleg from 11/12/16/12 low (134.70/184.94)

 

Momentum: Daily – Sell mode; Weekly – Sell mode; Monthly – Buy mode (Overbought)

Resistance:

184.69 (12/31/13 high)/184.94 (1/15 record peak) double top area

181.75 (11/29/13 range high/181.66 (1/24 daily high-gap low)/181.34 (1/13 range low)

 

Support:

177.64 (11/7/13 range high) /177.51 (10/30/13 range high)

177.32  (12/18/13 reaction low) near 38.2% of the upmove from 10/9/13 low (164.53/184.94 rise) and 100 day moving average

174.76 (11/7/13 low) near 14-month bull trendline from November 2012 low (connects 11/16/12 and 10/9/13 lows) and 50% of the upmove (164.53/184.94)

173.60 (9/19/13 high) near 23.6% of the entire upleg from 11/12/16/12 low (134.70/184.94)

170.97 (8/2/13 high) /169.07 (5/22/13 high) near 50% of upmove from 6/24/13 low (155.73/184.94) and the 200 day moving average

164.53 (10/9/13 higher low) near 38.2% of the entire upleg from 11/16/12 low (134.70/184.94)

159.71 (4/11/13 high)/160.22 (7/3/13 low) near 50% of entire upleg from 11/16/12 low (134.70/184.94)

157.52 (10/11/2007 peak) near 23.6% the entire upswing from March 2009 low (67.10/184.94)

S&P Index: RSI overbought on the monthly chart; 1575 area reverts as support

RSI reaches the overbought territory (above 70) which does not mean the market is going to go down. In the 1990s, RSI remained above 70 from 1996 to 2000 before the market crash. When the market was over 70 in RSI in 2007, the market did not peak until 2008. Potentially, the market could pullback to major support areas to unwind the overbought condition. The 1575 area (near the two prior peaks) now becomes support for the market corrections.

US dollar (DXY) turned bullish; Treasury bonds (TLT) remains bearish; Gold (GLD) remains to be seen, scope for downside; S&P monthly overbought

January 2^nd, 1^st trading day of 2014:

It seems to be a typical risk off day. Fundamentally it was the Manufacturing PMI from China to the UK and the Eurozone that were all a tad softer than expected. Technically, it was due for a reversal in all these markets.

SP was above all moving averages and achieved a monthly RSI at 77.6. The last two times when SP monthly RSI was at such high levels were 1999 and 2007 when the equity market peaked a year later. So far there is no obvious divergence yet in SP RSI on the daily, weekly and monthly time frames. Therefore, The current pullback remains to be bought. The 20 day MA at 1809 and 50 day MA at 1790 are support levels to be watched.

On the reverse side, TLT bounced after making a new low at 101.17. So far the monthly RSI is at 38, not oversold yet. Based on the head-&-shoulders projection, long-term bull trendline support, and the 1.618x extension target (as shown on the chart), the 95/94 area should be the logical target. In addition, the falling 50 day MA is about to cross below 200 day MA possibly around 109 which should cap near term bounces.

GLD also stalled at the 115.50 area which is near the 61.8% retracement of the November 2008/September 2011 (68.81/185.85) rise. On the daily chart, a minor double bottom (formed over the last 8 days) was confirmed, projecting upside towards 121.00 near the falling 50 day MA which may cap. If gold could break through the 50 day MA resistance, then we could see gold challenge the falling 200 day MA at 130. So far what is missing is volume increase on the upside.

US dollar index (DXY) has been holding above the 79/80 key support zone (including 2-year trendline support/200 week MA) as shown on the weekly chart. On the daily chart, DXY is breaking out of 7-week falling wedge resistance, bolstering for the 200 day MA at 81.50.

Bullish US dollar can be headwinds for the commodities in general and the emerging markets as well. Until we see the treasury yields show signs of peaking (e.g., TLT stops going down), US dollar index would trend higher to reflect the higher yields. The US stocks could see new highs before peaking for the current cycle.