Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

S&P Stock Index Charts Speak Loudest, Clearest, And Most Accurately

Stock-Markets / Stock Index Trading Jun 23, 2013 - 04:24 PM GMT

By: Michael_Noonan

Stock-Markets

Not that charts actually "speak," but the information taken from them can be the most reliable for anyone wanting to accumulate profits. Does not everyone want to accumulate profits? You would think that the answer would be an easy yes, but somewhere in the process of "investing" in the stock market, the answer is not as obvious as it would seem.

Why not?

Good question.

Lack of discipline is one of the more key answers. Ignorance comes to mind as a more widespread one. Too many people simply do not know what to do at the right time or at critical moments. When a stock or a futures contract is not going well, aka creating losses, the first question, it would seem, is what was the plan? What was the reason for entering into a position in the first place? What was the exit plan,[surely there was one]?


If there were no specific plan, a set of reasons for entering, and a plan of action for exiting, then ignorance becomes a primary factor. Ignorance is a noun meaning lack of knowledge or information. One can be somewhat lacking in knowledge, but with discipline and a plan, then the odds of success increase dramatically.

What does this have to do with charts? They provide a visual map for negotiating through the ups and downs in any market. Charts are the ultimate distillation of all available news and information. Everyone who makes a decision to buy or sell in the market leaves a mark. The culmination of all the "marks" left behind in the course of a trading day, [or any time frame], results in a high and low price, and eventually a closing price, forming a bar. Attendant with each bar is the amount of transactional volume, providing yet more info.

We may not be invited to learn the plans of moving a market by what can be called "smart money," the primary market influence[ers], but with price and volume, found in charts, but we can follow the "marks" they leave behind. To move any market requires strength in buying, and volume to provide price energy, [in an up market; the opposite in a down market]. The momentum developed in this process creates a trend. Solution? Follow the trend.

What we are seeing right now is a possible change in trend. The daily trend has turned down. The weekly trend has not. A conflict? Not really. One just needs to be aware of the primary trend under consideration.

The steeper a trend line, [TL], the more it is subject to a break, especially in the advanced stages of a trend. The poor close last month, 2nd bar from end, on low volume was a red flag for a lack of demand. In June, volume has picked up significantly, as price declined, another and bigger red flag.

A red flag is reason for caution and a clue to look at smaller time frames for change.

The sharper angle TL has been broken. The poor close on the high of this rally was a red flag, a clue that led to May's poor close for the month on above chart. It was followed by another down bar. The next bar, 3rd from the end, shows a rally effort, but results were weak, especially since volume, [effort] increased, yielding no payoff for the increased effort. You can see how a chain of trading days, since the red flag high, continues to show signs of weakness when the market should be strong, at highs.

There appears to be a momentum shift in progress. All we are doing is making factual observations that lead to logical conclusions. No guesswork is involved. It tells investors to take profits, certainly get rid of losers that can become bigger losers, and tighten stops on all other positions. For futures traders, it may be signaling shorting opportunities.

The weak rally lead to a lower high that was followed immediately by a wide range down bar on increased volume. The lower low confirms the change of trend. How the lower low is created give more information. The decline shows Ease of Downward Movement, [EDM], indicating a strong shift in momentum. Any rally that shows weakness can become a great shorting opportunity.

The NAS had been leading the S&P, in general, and it, too, is exhibiting weakness signs.

This larger chart of the weekly shows for how long it has been trending up. It takes time to turn a trend, so there is no reason to be panicking, but concern of longs can be heightened.

A closer look at the weekly shows how volume has increased dramatically as price began to decline, a significant change in market behavior, and a larger red flag.

We noted the last swing high, [arrow], was topped by a tiny range bar, a sure sign of a lack of demand. The trend did resume after a 8 week decline, and it is still possible that the current decline may yet lead to another leg up to new highs.

What is important is that we do not need to know what will develop/happen in advance. All we need do is focus on the smaller time frame developing activity and respond to the signs that determine how to position, based on facts, as mentioned on S&P daily.

By Michael Noonan

http://edgetraderplus.com

Michael Noonan, mn@edgetraderplus.com, is a Chicago-based trader with over 30 years in the business. His sole approach to analysis is derived from developing market pattern behavior, found in the form of Price, Volume, and Time, and it is generated from the best source possible, the market itself.

© 2013 Copyright Michael Noonan - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Michael Noonan Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in