Many analysts were expecting 850 to be a major resistance area, but the market took only one day to blow through it. I think 877 will be a more substantial resistance level.

Last week, JungleGirl said that the action looked corrective to her, and that indeed turned out to be the case. So far, April is a bull flag (click to enlarge):


A 100% extension will take us to 877, though the market may want to consolidate a bit first.

873 is also a potential peak. I projected this back here on March 18th. It’s not labeled on the Box of Za-Zoom chart at the bottom of that page, but the top of the range is 873:


The market closed Friday almost exactly on the 23.6% level in the Box of Za-Zoom, so the proportionality of the wave harmonics since the 666 low seem to be intact. Here is what it looks like now; notice the last three pivots developing at the projected Fibonacci levels:


So, it looks like the market wants to test the February peaks. If it can break above those peaks, then a test of the January high will likely be in the cards. In the next chart, I make a new box by duplicating the Box of Za-Zoom, and then stacking it on top. I dub it the “Box of Banks” in honor of the banks which have miraculously turned from toxic to fabulous – if you believe that sort of fairly tale.

Notice that the top of the box extends to the January peak:


If the rally is able to break into the Box of Banks, important resistance levels on the way up to 944 will likely turn out to be:


I still believe that the business cycle has not turned, and that this is another bear-market rally.

Jim “Shameless” Cramer

I am astounded at how utterly shameless Jim Cramer is. He is trash-talking the bears non-stop after making an horrendous string of idiotic calls himself. Here’s one example out of a multitude:

“So that’s the end of the Nasdaq rally? That’s it? We wipe out all of the gains in one session? I don’t think so. Of the areas being shelled today, the one that is most appealing to me is tech…It is important to remember that this group is going to be bought ever more aggressively as we get to September. Kept that in mind; use price breaks to accumulate, including this one.”

Cramer recommended accumulating tech stocks on August 18, 2008. Ridiculous! (click chart to enlarge):


Cramer was completely blind to one of the biggest plunges in history. His recommendation is deep underwater – even after one of the greatest rallies in history.

And he may be doing it again.

Cramer doesn’t seem to be disturbed by the decreasing volume of the rally or the wild gaps up and down. Is he getting ready to sail over another waterfall? Zero Hedge thinks so.

Q’s on the Cliff

The chart below plots the QQQQ, and the 21-day moving average of the TIKQ, which is the TICK count for the NASDAQ. TIKQ is the black line at the top, and the Q’s are the blue line at the bottom (click to enlarge):


The moving average stands at 338, and looking at the purple line you can see that this is about as high as it gets. The green vertical lines highlight previous highs and you can see that the Q’s rarely do well after such peaks – even during periods when the economy is strong.

Looking for further gains in tech from this level is like trying to snatch dimes in front of a bulldozer. You may get the dime, but is it really worth the risk?

Wednesday’s Trading – 4/8/09

On CNBC Tuesday, Bob Pisani reported that traders were telling him that they expected companies to give disappointing guidance that will push the recovery back to the third or fourth quarter. My question is: what recovery? Ain’t no recovery. Ain’t nothin’ to push back. From MarketWatch:

“Alcoa’s total sales fell to $4.1 billion in the first quarter, down from $5.7 billion a year ago.”

See what I mean? Ain’t no recovery. Time to barf up the Kool-Aid.

SPY’s Chaikin Oscillator has curled over from its peak on the daily chart. That’s a bearish sign.

The futures have recovered from their overnight plunge. Nevertheless, that should be considered a probe of 800 and an erosion of support.

Once the uptick announcement is out, it will probably be a good idea to short strength going forward.

The TARP Line

Here is a line that I’ve had on my SPX chart for a long time (click to enlarge):


The line is drawn through the high closes of August and September. It was the slope of the downtrend until Congress shot down the TARP.

I was wondering if the rally would respect the line, and it has so far. It was resistance on Thursday, Friday, and Monday.

Tuesday’s Trading – 4/7/09

Scumbag Cramer
How jealous is Cramer of Meredith Whitney? Here is Cramer sneering at her, and telling a blatant lie:

“Whitney hated these bank stocks 100% ago, kind of likes them now. Hard to take… “

In fact, on March 10th, Whitney said that she liked the banks for a trade at about 2:50 into this video.

The TARP Gap
Of all the charts that I follow, Apple is the first stock to approach its TARP Gap from September 29th. Another $6, and Apple will fill it. If I wanted to short Apple, that would be my spot.

The Mayo Gap
It might be significant that SPY, XLF, IWM, and even the Q’s were not able to fill the Mayo Gap on Monday.

Collapsing Demand for Natural Gas?
That doesn’t smell like the end of a recession to me. WSJ story here.

While the market is open, please limit comments to the market and events that may affect it.


Yerk has been warning us about the euro, so let’s look at the chart. In case you don’t know, the euro is pretty good leading indicator for the S&P 500. The FXE is the euro ETF (click chart to enlarge):

From its peak in December the FXE fell hard. Then it rocketed back up, along with the US stock market, in March. Notice that the FXE rally stopped at exactly the 61.8% Fibonacci retracement level (blue line). Since then, the FXE has pulled back in a bearish “broadening top” pattern (black lines). But it rallied back at the end of the week. If it can break above the upper black line, and the red Fibonacci line at 135.17, we could expect it to test its rally peak. If not, it may follow the lower black line down to test its low in mid April.

So far, the FXE is not confirming the new rally high on the SPX.

Game Plan – 4/3/09

Here is a chart of the XLF using weekly closing prices and a semi-log scale (click to enlarge):

That black arrow shows that the XLF is still under its red ODL (Obama Downtrend Line), and below its blue November low. If the suspension of market-to-market accounting can’t break it out over these two lines, then what can?

It’s possible that it was the Senate that threw cold water on the banking party. Forcing the Fed to name names is a really dumb idea. Suppose a bank gets in trouble and has to run to the Fed for a short-term loan. Today, the Fed would not rat them out to the media. If they did that, then there might be a run on the bank and a bear raid on its stock. So, the Senate might name their new law: The We Need More Bank Panics Act of 2009. Also, imagine the horror of seeing all the toxic waste on the Fed’s balance sheet in gory detail. Wow.

Bullish Frothing
Bulls are planning to buy the dip after the jobs report Friday morning. But the MacOS is very high again. If that dip-buying excursion fails, then the rest of the day could get ugly. We are overbought short-term, intermediate-term, and long-term. This is no time to be getting long, jobs report or not.

The 839.43 level that I’ve had listed was indeed an important level today. Also, today’s high was within a point of the 38.20% Fibonacci level that I calculated in the Box of Za-Zoom two weeks ago. In light of that, I have also added the next Za-Zoom level to the resistance list: 856.72.

Support levels:
832.98 – Peak on 3/26. Now weakened.
826.84 – The top of the Gap of Doom; now weakened.
811.00 – High on 3/31, and bottom of M2M Gap.
804.00 – Now a 23.6% retrace from the rally peak.
797.00 – Support on 3/23. Weakened.
791.37 – Intra-day low from March 25th. Weakened.
780.00 – Was resistance before the plunge to 666 & the low on 3/30.
768.54 – The Geithner Gap from March 23rd.
752.44 – November 20th low close.
741.02 – November intra-day low.

Resistance levels above are:
839.43 – The final resistance level before the Gap of Doom on Feb 13.
845.61 – Rally peak so far.
852.00 – Was resistance on Jan 26th and Feb 4th.
856.72 – Fibonacci level from Box of Za-Zoom.
875.01 – The February 9th peak.

Other Important Levels
800.58 – Weekly low close from 2002 (October).
815.26 – Monthly low close from 2002.
826.84 – Gap of Doom. Still critical on weekly chart.
831.00 – Obama Downtrend Line (ODL).
836.08 – 61.8% retrace of Jan 6 using closing prices.
838.01 – Ditto using intra-day high and low.

I have the Obama Downtrend Line at 831 for Friday. I have drawn the line from the close on Election Day through the close of the January 6th peak.

Now that we have retraced more than 78.6% of the drop from February 9th, a re-test of that peak is likely. If it’s going to happen, I would expect the market to consolidate a bit first.