Archive for May, 2010

This is the update of my May 23rd post of the weekly bars chart.

Last week I said that the perforation of the S2 curve was minor enough to say that support was still holding.  However, this past week’s action clearly is a breakdown of that support.  So, price is breaking supports while holding resistance, which is the Midas definition of a downtrend.

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This is the update to my April 24th post.

A lot has happened since the last update of this long term, monthly bars chart.  Last month, price hit both the 61.8% fib retracement level and the highest resistance curve, and also the level of the R1 from the quarterly bars chart (not shown).  And this month, May, price strongly retreated. breaking through S3, the uppermost green curve, which means the old uptrend has ended.  Also, the last three bars on this chart are a Shooting Star candle pattern, indicating the end of the uptrend.

Also, it’s interesting to note the TopFinder curve shown in purple here.  This one is fit to the bar at the purple arrow.  This TofFinder ended at the end of March, just before the top bar here.  We had shown this TopFinder curve several months ago, then later switched to following a longer term one (not shown here) fitted to the April price bar, and that one has not ended.  But, this earlier one has ended, making a good call of the top.

What happens from here?    It’s hard to say with only one bar down from the top.  Price did find support at S2, the second green curve, but the size of the down move this month of May is so large that it’s probably the beginning of a new downtrend.  We can’t say that for sure, though, until another couple of months.

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This is an update of my May 8th post.

Here’s the weekly bars chart of the S&P 500 through May 21st.  We see that after the dramatic support at the “flash crash”, price bounced up, turned over, and headed down to the S2 support curve.  This chart here shows what looks like a small break to the curve.  However, it was only below S2 for about 15 minutes at the beginning of the day on Friday the 21st, and on no other day.  After that short break, it zoomed above S2, and closed the day and the week far above S2.  I think that such a brief and relatively minor move is not worth identifying as a break of S2, so I’m saying that the market is till holding above S2, unless and until there is more significant and persistent dwelling below.

Before the open on Friday morning, I got an email from a very astute and colorful trader friend, who opined that the day was going to be an up day.   But, referring to the possibility of a significant break below S2, he said, “If we do tank the market then run for the hills with your pants on fire”.  That’s good advice which holds equally well going into this coming week.  Having been tested so dramatically, and held, S2 is now a very strong support level, so a real break below it could only happen if there is enormous force behind, meaning that the market would be likely to go much lower.

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This is a revision of my post of yesterday, which was an update of my post of May 2nd.

In this chart of the daily bars, we see the continuation of a downtrend that started after the high on April 26th.  Initially, it broke down through the old S3 curve (not shown) which indicated that the previous uptrend had ended.  Then, in the hectic down spike of May 6th, it broke through old S1, which indicated that this is a downtrend.  Furthermore, while it is breaking these supports, its pullups are holding below the new hierarchy of resistance curves, R1 and R2; this confirms that we are in a downtrend on this timeframe.

It’s interesting to look at the Money Flow Index in the upper pane.  This is actually the volume weighted RSI, and as an RSI, trendline analysis on the RSI curve itself is often found to be useful.  We see that the blue trendline was a leading indicator of the downtrend we’re in now, and furthermore, that trendline is still holding, so as yet, we have no leading indication of the end of this downtrend.

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Two days ago, the U. S. equities market, within a few minutes, experienced an unprecedented collapse and rebound, driven entirely by automated trading programs behaving in ways their owners didn’t intend.  So, since this was not human behavior, and since the goal of technical analysis is to model the behavior of human traders, one would not expect much insight from technical analysis regarding this extreme event.

Yet, look at this chart, the weekly bars chart of the S&P 500.  This is an update of my March 6th post here of the intermediate term S&P 500, q. v.  I have not changed any of the Midas curves on this chart; they have simply evolved with each week’s new price and volume data.  Thursday’s spike low came down right to curve S2 and bounced up. To be exact, Thursday’s low was only 0.3% above the curve, an utterly insignificant difference.  The market behaved in accordance with the Midas curve, with absolutely no human intervention.

One might say that this was just a coincidence.  However, over the 15 years that I’ve been using the Midas method, I’ve seen this happen over and over again, even as the market has evolved from all human to (at times) all machine behavior.  During moments of great panic and disarray, when none of the market participants have any idea what’s going to happen next, the market hits a previously identified Midas curve and turns around and bounces up.

For another example of this, look at the chart of the very long term S&P 500, quarterly bars, in my Feb. 8th post.  In early March of 2009, price was falling relentlessly, with no news or sentiment of any kind that would indicate that a significant bottom was at hand.  Yet, on March 6th, price exactly hit the primary S1 curve launched from the very beginning of the monstrous, two decades long bull market in 1983, and then price bounced up, launching the incredible bull market we’ve had since then.  I doubt that anyone in the markets was watching that S1 curve on March 6th of 2009; I know I wasn’t, and shame on me for I should’ve been.  And yet, it worked.

When Paul Levine developed the Midas method, he based it on assumptions of the human behavior of traders.  But I’ve come to the conclusion that there’s something very much deeper behind it.  In our forthcoming book, I discuss this further, illustrating how it works even in timeframes of a century, far longer than the lives of any market participants. I don’t know what that “something deeper” is, but I do know that it works.

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This is an update of my March 6th post on distribution.  See that post and its preceding ones for description of the indicators I’m showing here today.

In this chart we see that distribution is continuing and expanding out of U. S. equities.  My previous posts had showed 22-day averages in the upper pane, but that had too much noise on it, so now I’m showing 33-day averages, which are better behaved without significantly increasing the lag.

Over the last two weeks, distribution has accelerated as the market has gone into a consolidation.  This may well be telling us that the exit from this consolidation will be on the downside.

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This is the update of my April 24th post.

Last week, I thought that the modest breakout above the consolidation was the start of a new uptrend.  However, that was not to be, as price fell back into the consolidation.  On Tuesday, price fell down to S3A and so far has supported there.  From here, we cannot say a new trend has started until price either breaks above last Monday’s high or below S3A.

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