The Rogue Investor » MACD

Rally From Support Comes to Halt

Alex — Mon, 01 Mar 2010 23:44:20 +0000

After an impressive show of strength, the market has hit a wall.

From the most recent bottom, on February 8th, the S&P 500 has rallied a whopping 5%. Unfortunately, volume has continued to fall as prices advanced signaling a lack of support from professionals.

Most recently, the S&P has lost all of its steam, closing down 0.42% over the last week. Furthermore, the MACD has rolled over finalizing the loss of momentum.

The situation we face now is a market that is in a 5% wide trading range. IBD still classifies this market as “in correction” and until we see a breakout over 1115, a long position is unadvised. On the other hand, if prices fall below the 200MA, currently around 1050, we could see a major decline.

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Strength Emerges; Markets Claw Back as Rally looks Probable

Alex — Sat, 06 Feb 2010 23:23:43 +0000

Just as I was sure that the floor had dropped out, strength emerged as the S&P 500 closed on highs for the session.

Once again, I think this is a great example of using bad news to create a buying opportunity for the professionals. Here, we are seeing prices driven down by bearish news only to finish on the highs on increased volume. How could everyone be selling if the market closes on highs?

Another factor to look at is the MACD. Here we are seeing bullish indications as the histogram is increasing even while prices were making new relative lows.

Taking a long position on the market might be a good idea on Monday. For the less risky, wait for confirmation and a strong day of 1% or more gain.

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Correction Reaches Breaking Point

Alex — Mon, 01 Feb 2010 04:52:13 +0000

With February upon us, we have to wonder how much farther the market will fall. The S&P 500 is right at the trend line support levels and the MACD is reaching extreme, negative levels.

One characteristic that has got me wondering if the rally isn’t over for good is the size of this correction. Currently, we are down over 6.5% from the top. The last two pullbacks were only 5.6% and 4.3%.

The trend is definitely bearish as each regression is getting larger. Moreover, the volume has been much more bearish this time over as we see large spikes on the down-days and a drop-off on the up-days.

On a weekly basis, the damage looks less severe. Volume was lower in the second week of the pullback but both weeks finished on the lows.

Overall, this next week will be critical. If the market can’t hold at support, we could see quite a drop. I expect to see a pop that fails to make new highs and provides us an excellent point to short. Keep your eyes open and sell good news.

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Market Analysis: Weekly Chart Filled with Divergences

Alex — Mon, 14 Sep 2009 03:18:33 +0000

I have been skeptical of this rally for a while now. I’ve taken the stance of “oh it could never keep going” and then came to realize that it doesn’t matter what I think. Go with the flow but stay skeptical.

I have a weekly chart of the Dow above with 4 areas marked:

Here we see a very solid up-trend in prices that has lasted quite a few months. Bullish.
I’ve drawn a trend line on the RSI and we are in overbought territory. Bearish.
A significant dry up in volume has developed as prices move higher. Bearish.
This is a bearish divergence in the MACD as the market keeps making new highs and the MACD fails to do the same. Bearish.

Overall, you can see that we are treading on thin ice here and could see the end of the rally soon. Now, I’m not the only one predicting this market action. I was checking out this post by The Crosshairs Trader and watched this video from CNBC:

Mr. Nenner is a bit unorganized here but I think his predictions are definitely something to pay attention to. It doesn’t take a genius to see all this coming. It does take some skill to stay disciplined and make the most of the situation.

Right now I would ride out the wave, but be cautious of the possible end of the rally.

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Stock Pick: Long KSS on Breakout

Alex — Tue, 08 Sep 2009 23:05:12 +0000

KSS has a great looking chart with an impressive rally over the last 4 days. As I’ve pointed out on the chart, the positives include breaking into higher ground finishing on highs, increased volume today and over the last 4 days, and the MACD making new relative highs as the stock moves higher.

For all of these reasons I added the stock to The Rogue Portfolio as a long position.