Weekly Stock Market Video and Commentary

As we finish up May, it has been clearly evident that this mkt. is showing glaring signs of weakness. However, I am still anticipating another run up. I certainly could be way off base, and this may be the beginning of a big drop, but I just think that the bulls have one more shot in them before getting taken out to the woodshed. The 200 ma has been taken out by most of the indices, and looks to now play the role of resistance. However, the more it gets tested AND breached, the less of a factor it will become. There is a distinct possibility of a head and shoulders pattern set up on the SPX, and that would require another leg up from where it is now. All in all, the VIX remains high, the v will likely shrink into the summer, and there is a lot of bad news out there, so I think we will continue to see very volatile days, weeks and months. Now onto this week’s video.

Weekly Stock Market Video

There has been a definite increase in volatility in this mkt. The news is starting to cause moves, and even non-news is causing mkt. moves. As you will see in the video, in the longer term charts, the indices have  come up against resistance; a prime area for a pullback. I am looking for a good move down, and then another rally. It may be the last big rally of the summer, that is still to be determined, but I have a feeling we are going to see some unraveling of the recent good news. And when a mkt. becomes volatile and swingy, unexpected or wte news can be the catalyst for huge down moves. I really think this is a key month, at the end of the month the low summer volume should kick in, and this month will set the tone for the summer. Or in other words, the big money will set the tone for the summer. If they take this month and make it really green, then I think that is the general direction of the summer. But if this month ends down significantly, without that rally, then I think the general tone of the summer will be down. Enough typing, it is video time.

network news

Well it is official, DOW 11 k has been breached and in case you missed it, it is headlines on the network news. NBC News CBS News

Now let’s think about this a little: This rally has happened on low volume; it has been assumed this was because the 401 k casual crew still has moolah on the sidelines; will they take this news as the “all clear” to get back into the mkt? If so, will the Pros take advantage of this? I assure you that if the first two premises are true, then the last premise will certainly be true. The weekend investor will invest off of what they hear on the news, on CNBC on the weekend radio. They will not do their own research and they DO NOT trade to the downside. The only trade to go up. My guess is that the news will continue to hype the DOW and the recovery and that they will do their best to push it to 12, 000. They want everyone to feel safe, everyone to throw their hard-earned money into the mkt. and push it up until there is no money on the sidelines anymore, and at that time, right then KABOOM. I have assumed this would have happened already, several times, and I was brutally wrong. But I am extremely confident it will happen, I am just not sure when. So until then I will continue to do short-term trades, by minutes, hours, a couple of days, while the only long-term trades I do are not covered in this blog, selling options, that is a whole other category. Anyway, I still think we will have a quick sell off before we get another real push up, but watch v closely, especially going into summer. Typically, If v increases in the summer, something is off and be cautious. Therefore, it would make the most sense for all of this to happen this fall, so that is my long-term thought.

The VIX closed beneath the gray box of support for the first time since 2007, I would say that could definitely be significant. The only caveat here is that it is a reversal candle, and if you look at the VXN it actually rallied quite a bit off the bottom.

This is a weekly of the DJI, or DOW. I put this up to show the breakouts and the next most logical area of strong resistance around 11, 750. I would imagine it would be very, very , very unlikely that we hit that without a significant pullback and I would also think that each next milestone will take longer to achieve, until we reach the top. There we will see a buying frenzy.

The NAS continues to rocket up and is very close to what I think will be the next significant resistance. I thought it would rally up and hit this on the same day the DJI took out 11k, but it did not. That is what I thought would trip the sell off.

This is the SPY. You can see it is achingly, slowly rallying up to near the top of this megaphone pattern. I point out that last time the SPY stayed over-bought for about 9 weeks, with one correction. In this current rally, we have no correction. Also note that the v is decreasing quickly. As you know, I think we are overdue for a correction.

In closing: I will do some stock set ups tonight on Chart.ly and Twitter. But on here, tonight, I wanted to share my long-term thoughts with you. I am open to opposing suggestions, thoughts, or analysis. Trade well and prosper. AKOT