Rally fades

qqqq0514.pngStock indexes bounced off support a few days ago, with a nice upturn in the oversold momentum indicator. The previous chart of the S&P was a near perfect example. Today I show the Nasdaq/QQQQ, which has been a bit stronger, and wasn’t able to quite touch the slower moving average on the recent pullback. Volume did not expand on the upmove. Today the rally carried forward nicely in the first part of the day. It looked like a clear breakout on the QQQQ chart. The S&P was also testing the previous high, but didn’t quite have the strength to push to new recent highs. The rally started to stall in the upper range of the bar, and price started to rotate back and forth in a tight range. Then the rally started to fade and the indexes closed near the lows of the day, and the Nasdaq closed with a loss for the day. What is more significant that the modest net changes on a closing basis is the failure of the test of the recent highs. You can see on the QQQQ chart where the yellow line is drawn how price pushed up and then fell back under the yellow line, creating a bearish upthrust bar. This failure is also known as a “turtle soup” pattern according to Larry Connors and Linda Raschke. It is named after the famous Richard Dennis turtle system, which when it fails, which is most of the time, the turtles are in the soup. Volume also picked up a bit on this failure bar. The trend is still up, but this looks ominous. Momentum is starting to turn down with a possible bearish divergence. The low pivot of four days ago is a key level to hold if this uptrend is to continue.
crude0514.pngThe dollar has rallied, and gold has dropped, and many of the commodity bubbles look like they are deflating, except crude oil. This uptrend has lasted longer than I thought possible. Fortunately I respected the uptrend and have not even tried to short this market yet, even though I’ve been tempted. There seems little reason for this uptrend. There seems to be more oil around than can be used. It seems like speculation has set the price and that price is being accepted. Now that the dollar is showing signs of bottoming and other markets are deflating, it seems logical that crude should come down. But it seems to be going its own way. There is a downturn in momentum, and the current swing could be ending, and this swing is less than half the length in time than the last swing. But every time there is evidence of the trend turning down, price finds support on the moving average and then puts in another upleg. This will end when everyone things it never will.
crudecot0514.pngOne thing that might prolong this uptrend a bit longer is the small traders on the commitment of traders. The yellow line in the subgraph on the chart to the left is the net position of the non-reporting, or small traders. Anything under the cyan horizontal line shows a net short position. You can see that short position is increasing at the same time the net commercial shorts (blue line) are covering, and the large traders (red line) is slightly increasing their long positions. This data is from a week ago Tuesday, so it might have changed. The data is released every Friday, reflecting the data from the previous Tuesday. There is a new book by Steve Briese on the commitment of traders data. I put a link on the Tucker Report Amazon store in the technical analysis section. It should appear as the first book in that section. I haven’t put it in my books link yet as I haven’t read the book. It is supposed to be excellent. I have it on order and should be getting it soon and will report on it after I’ve read it. This data is quite useful, and it is free from the government. Yes, the government is here to help us trade.

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