Sunday, February 9, 2014

Weekend Analysis: Markets At Resistance

The U.S. stock markets had their best 2 day percentage gain since the reversal off the Oct. lows. However, these are not the same markets as they were then. After grinding higher to close out 2013, Jan. was not avery kind to Ms. Market. It was the 1st down month for the S&P 500 since Aug. 2013. The difference between now and then is very different. Last Monday, Feb. 3, the SPX took out the lows for Jan., Dec. and Nov. The downturn in Aug. failed to take out any prior months lows. What we have here is a distinct change in market behavior. Many fundamentally biased investors/traders will be quick to dismiss this analysis because by the end of the week markets had rallied more than enough to make up for Monday's losses. The technicals are saying beware. The /ES futures at the close on Friday rallied right up to weekly resistance that repelled it the last week of Jan. Bottom line: We should see volatility pick up Sunday night through Monday's close in the S&P futures. If we do not see an emphatic break lower in the markets by Tuesday or Wednesday then the markets will probably make new highs (or at a min test the prior highs.) If the markets are destined for lower prices in the near term, prices should not exceed Friday's by more than a fraction of a percent. Included in the charts below is  2 charts of AAPL. The monthly chart shows that $420-430 is still in play over the next couple of months. If it were to close a month under that level, it means AAPL is headed to $225-250 over the next 24 months. The 60 min chart is what I was trading off of when making the bear call spread that I posted on Friday. Because they are Feb. options, I am looking to stay in this trade a relatively short period of time. Possibly, a few days.

Dow Jones Industrial Avg. => Broken monthly trend line 
/ES Futures Weekly
/ES 4 hour
/NQ 4 hr
AAPL 20yr monthly
AAPL 60 min

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