Stock Market Analysis

Monday, March 12, 2018

Bulls Are Back!


Welcome to Week 3 of March!

Week 3 of March, June, September and December are Quadruple Witching weeks, meaning, 4 different derivative instruments all expire together on the same Friday on these months, creating an exceptionally volatile day on the day itself and some abnormally bullish tendencies on large cap stocks.

This tendency continues to support the bullish breakout last Friday, which happened exactly as I have predicted last week, breaking out on the back of the Jobs Report!

This week's bullish tendency on Quadruple Witching week continues to support this bullish reversal! However, I won't be surprised to see some profit taking on Monday and / or Tuesday as some short term traders take profit off the table on their correct short term bet. Even so, the reversal pattern has been completed and there simply isn't any reason to believe that the bulls are back and that we should see new highs soon. In fact, both the bond yields and the total equities put call ratio are moving together at last once again.

All in all, exactly as I have predicted last week, the intermediate correction has officially ended and the bulls are back again.
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For now, the market turns a short term bull trend within an intermediate neutral trend and primary bull trend.

Monday, March 05, 2018

Is This Intermediate Correction Ever Going To End?

Welcome to week 2 of March 2018!

Spring time is here and no, it barely feels like Spring in the US market as the market continues to struggle with the February intermediate correction after a failed attempt to test and hold the 30MA for support early last week.

Even though the market has so so so sluggish and so so so disappointing for missing the last rebound point, it still does look on track for recovering the bull trend so far. In fact, like I said early in February, I don't see this intermediate correction ending easily with a V shaped reversal. That was why I was actually quite surprised to see the S&P500 reach up and close beyond the 30MA after a sharp V bottom. However, from the looks of it, my initial expectation was correct and that the bears just aren't giving up like that. However, that still puts the market pretty much on track on my initial expectation; reaching up and then failing before finding strength again for a real reversal. This seems to be just about when that is going to happen.

However, that being said, the next few days still look extremely dangerous as even though last Friday was a positive close, it was still a day with a lower high and a lower low, making it more of a bearish continuation day rather than a bullish reversal day. Options traders are obviously not onboard with that positive close as they continued to trade in favor of put options, keeping total equities put call ratio above 1.0 in favor of put options trading.

This week, the market awaits the grandfather of all economic indicators; the jobs report, on Friday. Consensus is expecting a slightly better reading which isn't hard to beat given the position of the non-farm payroll being at around the mid point of the last 12 months. As such, looking at how the market is positioned in relation to this report, we might see the bears continue through the week before finding strength from the jobs report for a real reversal.

For now, the market remains in short term bear trend within an intermediate neutral trend and primary bull trend.