BigTrends

The Williams %R is a key momentum indicator that helps us determine trends. I use 30 bars when examining the daily and the hourly chart, also with RSI (14 bars) and MACD to help determine the quality of the trend. Price Headley uses the %R as his specialty tool and trades quite well using it.

Well, I looked at the daily on the SPX with the %R, and it looks quite similar to this past February. Notice the rise up to the 50 area in the indicator. Could we see a repeat from early spring, when markets ran up to new yearly highs? We'll have to see, but this one momentum indicator is certainly supporting the bullish case.

The S&P 500 Index (SPX) (SPY) has been on a very consistent run for virtually all of the month of March.  How consistent?  Well if you take a look at the SPY Daily Chart below, you can see that we haven't even breached the 80 level on Percent R for the last 17 trading days.  Normally, we would see "bullish re-tests" of the key 80 level during an uptrend such as this.

What did previous runs of consistent Percent R strength bode for the market?  Well, I looked back on many years of SPY data going back to 1993 -- the results are not yet conclusive (I'm waiting for the run above 80 to end to garner the most similar data), but it did tend to show that the market would be likely to underperform over the next month compared to an average month in that time frame.  Further analysis will be provided (if noteworthy) when we finally do break below 80 on the SPY Daily Chart.

Also of note on the chart below is that MACD just had a bearish crossover on Friday.  You can see that the previous crossover, a bullish one in mid-February, was a nice indicator of market strength ahead.

One of the clues to finding turns in the market is to identify the subtle clues of the market.  Price action is always king and volume is the queen.  So, we have a chart below with notes that tell you how this got started.  Institutional distribution is slow and methodical but very evident if you take a step back and look.  The blue arrow was the day after Thanksgiving..big sell day.  Oh sure, the mkt rallied from there, but the big players were taking $$$ off the table.  You didn't know it, but it happened.

Ok...now, next levels if the spx closes UNDER 1072?  We're looking at minor support at 1055, then stronger levels at 1030.  Note, this market is now correcting in time AND price, which means swift moves down to counter the long grind higher.

In late July, I issued a trade alert (July 23) to buy some Sept calls on high-flying First Solar.  Specifically, we bought the Sept 200 calls at 3.38.  This order was sent moments before the start of my webinar, 11am EST.  I mentioned this trade a few times, and the stock was sitting around most of the day...but edged higher.  We were filled on this day.  The next day, the stock shot higher on the heels of a competitor's earnings.  This left a gap of course, but when the shorts are on the run this has a habit of going further.  We kept it going.  On Monday, the stock pushed into a resistance zone and that gave us more than a double on the calls.  We sold half for 7.72 (130% gain) and held the other half for free.  Earnings were to be out on Thursday (7.30) after the close, so the worst was that we would still make money on this if the reaction was bad.  Flash forward to Wed, and the stock is making a nice move but on LOWER volume...RED FLAG.  This told me that buyers were not interested here, so we decided to take the remainder off the board, and still managed a double (111%).  We were now completely out of the position in front of earnings.   Thursday's report was mixed, yet the stock couldn't hold water and tanked more than 11% to under 155.  The calls we held would be well underwater now.  This was a winning trade from the start and managed properly.  Sometimes it's ok to take earnings risk, other times it's better to take it off.   In this market, awareness, quickness and satisfaction need to be considered at all times.   See chart below.

One of my favorite indicators on the website www.StockCharts.com is the Nasdaq Summation indicator ($NASI). This market timing indicator shows you whether the market is near a historical overbought or oversold extreme. Read on to see my explanation on where this indicator currently stands.