SPY Technical Analysis - Click to enlarge

We’ve all seen S&P 500 and the general market sell off in the past since March of 2009.  Each time though, the bulls shrugged it off and came back even stronger.  Time after time, the bears were caught and the bulls prevailed.  By Q4 2009, no longs believed the sell-offs will last.  And they were right.

Almost a year later since the March ’09 low, we’re facing a similar situation: another sell-off.  Many still believe longs are taking a break, and that they are simply waiting for another entry point.  However, people are starting to take more caution this time around for the bullish side.  The sentiments I see aren’t as positive as they were previously.

We saw the market dip below the 50 day moving average in July ’09.  It was a teaser for the shorts.  The market did it again in November ’09.  Another tease.  Now the market is doing it again, with legit force.  Third time’s a charm?

No one knows for sure, but what I am doing is paying close attention to the support lines shown in the chart.  If the third support line is broken, there aren’t many notable supports left for a while.

Taken from their recent posts:

Pretty much what I expected to happen today – we are at an inflection point plus it’s the Friday before OPX. So, what’s better for those cattle prod wielding market makers than inflict just a bit more theta burn while we wait for a conclusion of this bear market rally saga?

Tonight I find myself between a rock and a hard place. The wave count right now appars quite clear – we seem to have completed an {a}-{b}-{c} and are now completing Minor C of Intermediate (Y) of Primary {2} – this scenario is marked in orange labels on the chart:

Taken from Evil Speculator

Personally, I myself do not feel confident about any of the bearish scenarios that are floating around out in the EWT blogosphere, but I do recognize the potential that, wave count be damned, we might just suddenly drop tomorrow.

So the man behind Evil Speculator thinks we’re going further up.  Well he also shares a separate scenario indicated in blue that is bearish:

I usually never do this but tonight I decided to also show Steven Hochberg’s counts (he’s the author of the Short Term Update and resident editor at EWI) – his is labeled in blue. Basically Steven prognosticates that we painted a flat after the September 25 low, which completed today and that would mean that we’re now ready to drop into a long third wave. So, his count would be that we are in Minute {ii} of Minor 1 of Intermediate (1) of Primary wave {3}.

I deeply respect Steven and it pains me to say this, but I think his count is a stretch at best. Also, the Dollar’s drop today did not help the bearish cause and I have a hard time believing that this market will turn before the Dollar finds at least a temporary floor – thus far the wave pattern on the ole’ buck looks incomplete and we could easily drop below 75 before we finally push into a meaningful rally.

Here are the good news: In regards to Orange vs. Blue we should know very soon – perhaps even by tomorrow. On the chart above I have pointed out the confirmation lines for each scenario. As you can see the orange doesn’t have that far to go.

Indeed, with the option expiration nearing us, this week should help us understand whether the market will make new highs or start retracing.

Market made quite a comeback this past week, similar to what we saw in early September.  This is why “one distribution week doesn’t make any trend”.  It bounced off nicely from the 50 day MA near the support and is looking to test the previous highs.  Many I follow say this week will tell the tale.  Bulls vs Bears.  Let’s see where the market takes us, because I’m certainly not certain.

Financial Select Sector SPDR  (XLF)

XLF Financial Select Sector SPDR came back strong similar to rest of the market last week, bouncing off near the 50 day MA and the support level.  However, the MACD divergence is still there and I still cannot be bullish on the financials.  Again this week should tell whether this bull rally will continue further or pull back is still in effect.

SPDR S&P 500 (SPY)

Same story here.  Despite the big distribution week the week prior, S&P500 and SPY bounced off from the 50 day MA last week and now testing the previous support.  Deja Vu?  You bet.  We’ve all seen this similar pattern in September, and many predict the same story will be told once again.  This bull trend is strong.

United States Natural Gas Fund (UNG) requested by Linda Li

United States Natural Gas Fund (UNG) has been consolidating for the last three weeks trying to break through the resistance at $12.   This consolidation is lasting for a quite some time, and as I have mentioned before I wouldn’t want to get into natural gas at this point with lots of uncertainty.

United States Oil Fund LP (USO)

United States Oil Fund LP (USO) and oil in general has been getting a lot of attention from the technical side as it broke through the triangle pattern.  What’s interesting is that many were screaming “Short!” when the big sell-off took place and ended up getting shaken out by the big rally that followed shortly thereafter.  It is now facing some resistance again at the 50 day MA, and it has been in the consolidation mode for the past week.  Not too much certainty from the technical stand point.

SPDR Gold Trust (GLD) requested by Dorothy Wilcox

SPDR Gold Trust (GLD) broke through the symmetrical triangle pattern and has rallied since.  However, GLD continued to struggle at the next big resistance of $99 for quite some time.  Then the big week came last week.  GLD broke the resistance with a big bang making an open gap Tuesday.  So now the GLD is looking more likely to push further forward.  However, be very careful of Tuesday’s gap open.  As you may have heard already, gaps tend to be filled in the future days.  Some go as far as saying “gaps always get filled”.  I don’t necessary agree but gaps always concern me.  Bottom line,  buying long here would be hesitant for me given the gap, but the $99 resistance will certainly act as a support should the Gold decide to retreat in the coming weeks.  Good news for longs on GLD.

Research in Motion Limited (RIMM) Requested by Jeff Wold

As mentioned last week that Research in Motion Limited (RIMM) may see a bounce from the support level around $63, RIMM bounced back last week near the support level.  However, I don’t foresee RIMM recovering what it has lost already very quickly, even if it does.  If someone has fundamental reasons to get into RIMM or believe in its business/financial viability, great.  I personally would expect RIMM to trade in a range in the next few weeks.

Diamond Trust, Series 1 (DIA) Requested by Johnny

Diamond Trust, Series 1 (DIA) that tracks the Dow Jones Industrial Average has the same o’ story.  Big distribution, followed by just as big recovery.  Again, September all over again.  DIA also is facing the previous resistance level, so this week should tell whether the market will continue its rally, or if the pull back is still in effect.

With big distribution week, Nasdaq QQQQ now broke through the rising wedge.  It even broke through the resistance around $41 and the volume was pretty good.  This is now looking like an opportunity for me.  For those of you patiently waiting for the right timing, this may be your opportunity as well.  One distribution week doesn’t make any trend, but it could certainly be the beginning.  People are certainly paying attention to the big sell off last week.  I wouldn’t be surprised if QQQQ consolidated for a bit, but the possibility of further decline is now greater.

Financial Select Sector SPDR  (XLF)

For the same reasons mentioned before, I have not been too bullish on the financials right now.  Broke through the support level and the risk to the downside is now great than it was before.

SPDR S&P 500 (SPY)

S&P 500 broke through the trendline similar to the other indices.  It’s sitting at the 50 day MA and nearing the next support around $101.  If you’re a bull here, be cautious going into Q4 as the quarter-end window dressing is now over, and we could see what the “true market” will do in the next few weeks.  Now, if you’re eying the short side, you need to be cognizant of all the support levels out there.  Even if the market’s going to decline, it won’t be an easy ride down.  After all, the overall trend is still bullish.

United States Natural Gas Fund (UNG) requested by Linda Li

United States Natural Gas Fund (UNG) has been consolidating for the last three weeks trying to break through the resistance at $12.  As I mentioned last week, I would not want to get into natural gas here if I’m depending on the technicals to suggest an entry point.  I would really want to see the price break through $12 and sustain it.

United States Oil Fund LP (USO)

United States Oil Fund LP (USO) and oil in general has been getting a lot of attention from the technical side as it broke through the triangle pattern.  What’s interesting is that many were screaming “Short!” when the big sell-off took place and ended up getting shaken out by the big rally that followed shortly thereafter.  It is now facing some resistance again at the 50 day MA, and it could resume it’s decline again.  I can’t say with assertion, but I say the risk is greater on the downside now than upside for Oil.

SPDR Gold Trust (GLD) requested by Dorothy Wilcox

SPDR Gold Trust (GLD) broke through the symmetrical triangle pattern and has rallied since.  However, GLD continues to struggle at the next big resistance of $99.  If Gold can really break through this big resistance, it would likely resume it’s rally beyond $100.   If you don’t own GLD and are thinking about it, it’s probably worth the wait to see its next move.

Research in Motion Limited (RIMM) Requested by Dan Hearn

I still don’t have anything positive to say about Research in Motion Limited (RIMM) after the massive sell-off.  I personally don’t have a good assumption on where RIMM goes in the next few weeks, but I wouldn’t be surprised if it consolidated in a range for the next few weeks.  Bottom line, the damage has already been done, so RIMM won’t recover quickly unless positive news saves the sentiment.  Short-term, we may see some bounce from the support level around $63.

While QQQQ is still trading within the rising wedge channel, it is testing the resistance now.  Given last week’s distribution, I would be very cautious as a long, paying close attention to the prices in the next few weeks.  Now this could also mean it’s a buying opportunity, and shorts should not get too excited here and jump the gun.   Quarter end window dressing could play a role this week as well.  Exciting week for sure.

Financial Select Sector SPDR  (XLF)

For the same reasons mentioned last week, I am not too bullish on the financials right now.  Pay attention to the current support level this week.

SPDR S&P 500 (SPY)

S&P 500 is sitting right at the trendline looking to either break through the trend or bounce off, resuming it’s rally.  I wouldn’t be surprised if we see a bounce here given the quarter end window dressing, but we need to pay close attention to this trendline in the next few weeks.

United States Natural Gas Fund (UNG)

United States Natural Gas Fund (UNG) has been consolidating for the last two weeks trying to break through the resistance at $12.  I would not want to get into natural gas here if I’m depending on the technicals to suggest an entry point.  I would really want to see the price break through $12 and sustain it.

iShares Silver Trust (SLV) requested by Wayne (applies for ZSL silver short)

iShares Silver Trust (SLV) had quite a sell off last week and is now sitting at the support.  I’ve seen some investors accumulating more silver, seeing this as a buying opportunity.  It’ll be interesting to see where silver goes in the next few weeks.  If it breaks through this support, we won’t see a strong support for quite some time, so be careful on the long side.

SPDR Gold Trust (GLD) requested by Dorothy Wilcox

SPDR Gold Trust (GLD) broke through the symmetrical triangle pattern and has rallied since.  However, GLD continues to struggle at the next big resistance of $99.  Gold faced some big distribution week sitting at the $97 support level.  Here’s a video on Gold that’s interesting to watch.

Research in Motion Limited (RIMM) Requested by Jamieson

Research in Motion Limited (RIMM) just looks ugly now.  A massive sell-off after the earnings report that looked bleak in the future.  I personally don’t have a good assumption on where RIMM goes in the next few weeks, but I wouldn’t be surprised if it consolidated in a range for the next few weeks.  Bottom line, the damage has already been done, so RIMM won’t recover quickly unless positive news save the sentiment.

Apple, Inc (AAPL) requested by Jerry Perlmutter

AAPL Weekly Chart

Looking at Apple’s weekly chart for the past three years, you will see that it is right at the resistance level, nearing a 3 year high.  It did pull back slightly last week from the resistance.  Given AAPL has been a clear winner since March ’09, we may see further upside this week for quarter-end window dressing.  At the same time, I’m very skeptical as to how much more upside AAPL has from here.  If it’s going to break through the resistance and start making new highs, it won’t be quick.  I would rather expect some consolidation/pull-back to occur before and if it continues to rally.

Nasdaq continues to trade within the rising wedge pattern.  Since breaking out from the resistance, it’s going strong.  If you’re thinking of going long, keep your stops tight as it’s approaching the top of the rising wedge.  Nasdaq could break through and continue higher, but the risk of a pull back in the next few weeks is definitely there.  Clearly a bullish trend still, but be cautious as QQQQ starts to approach $43-44 level.

Financial Select Sector SPDR  (XLF)

Financials broke through the resistance and rallied strong, but I’m very skeptical on the long side when it comes to XLF.   First, it’s starting to consolidate and hit some resistance at the trendline it broke through previous.  Second, I see a MACD divergence between the rising price and the declining MACD.  This usually signals a bearish correction ahead.  The overall theme here is bullish still just like the other indices, but I’m not all that comfortable about XLF long.

SPDR S&P 500 (SPY)

Similar to what I eluded to for Nasdaq (QQQQ), SPY is still going strong breaking through the previous resistance and making a new high.  This bullish trend is resilient and continues to test new highs.  If you’re not already long and are looking to take some long positions, hope for a pull-back here before getting in.

United States Natural Gas Fund (UNG)

United States Natural Gas Fund (UNG) made quite a come back and seems to be making a “V-shaped” recovery.  Now this is now going to get interesting.  It is now consolidating at the prior resistance of $12.  I’d expect this resistance to  be pretty strong, and I have seen some experts getting rid of their natural gas positions.  If you have been riding the rally since the recent lows, it would be wise to lock in some profit by unloading a part of your shares.  Next two weeks will be a ride!

SPDR Gold Trust (GLD)

SPDR Gold Trust (GLD) broke through the symmetrical triangle pattern and has rallied since.  However, GLD continues to struggle at the next big resistance of $99.  Some say this is the start of a reversal and it’s time to short.  Others say it will break through the $99 resistance making new highs.  It’s hard to say still given this consolidation, but I’m personally leaning towards the latter.

General Electric (GE) Requested by Eric Staedt, Yue Liu, and Gia

GE Weekly Chart

I am showing the technical analysis for General Electric (GE) from a different angle this week.  Looking at the weekly chart above, I’ve drawn the Fibonacci Retracement looking at the 2 yr highs and lows.  As many of you are aware, GE performed quite a rally last week bringing wealth to many who were long.  Now, the Fibonacci would suggest that GE still could have room for upside.   Assuming 38.2% is the first level to watch for, GE could make another run to the $19 price level in which would face some resistance.   Overall, breaking through the long fought resistance at $15 is pretty significant.  If you’re long, perhaps lock in some profit by unloading part of your shares, but no reason to think it’s going to the other side just yet.

I’ve covered SOHU a few times in the past (here and here), so you’re aware that I follow this stock by now.  As many have been paying attention to the recent break out, SOHU has gained significant momentum in the past few days.  Well, today was a bit different with indecision kicking in.  First I sold my Oct 70 Call when I saw the double top form intra-day (see below).

SOHU Intra-day 5 mins Chart

Then when I saw the stock reach below $71, I switched gear to Oct 70 Put.  Unfortunately, I ended up getting stopped out, breaking even from this trade as SOHU recovered toward the end.  Looking at the technicals closely, you will see that it bounced off of the prior resistance of ~$69.50 level twice (Wednesday/Thursday), which it broke out from now acting as a support.

SOHU Daily Chart

If you look at the 3 yr weekly chart, you will see that SOHU has indeed broken through a strong resistance and now acting as support.

SOHU 3yr Weekly Chart

So what do I conclude from this?  Even though today’s near Doji pattern suggests SOHU could be approaching the top for now, SOHU can still go some ways if this support still holds, and it has so far.  However, if the overall market starts to lose steam from here, as many are speculating, this could end up in a failed breakout tracking the overall market.  I’m still bullish here, but with very tight stops as the market continues to be over-extended and SOHU tends to move up or down very rapidly.