It’s official.  I’ve been highlighting the possibility of a head and shoulders top confirmation on the Dow and S&P for several weeks and now we have confirmation of those formations as both broke through the neck lines this week.  While we’re oversold and could see a minor bounce, the momentum and trend is clearly down until proven otherwise. 

It’s interesting to see all the discussion about the head and shoulders formation on CNBC, who seem to be paying more attention to technical analysis.  Even Jim Cramer is turning to the dark side and displaying charts on his show.  It wasn’t long ago that charting was ridiculed and dismissed as voodoo by the mainstream media.

Let’s turn to the voodoo and take a look at the Nasdaq,

Read Entire Post “S&P, Dow Confirm Head & Shoulders; Nasdaq Close To Confirming Double Top” Here

I’ve talked quite a bit about the head and shoulders top formations in the Dow and S&P500 in recent weeks and it looks like we might get confirmation of those topping formations soon, based on early trading action today.  What that means is that there is going to be an abundance of ways to play this market on the short side and I have one to keep an eye on today.  The company is Green Mountain Coffee Roasters (GMCR).

The maker of single cup coffee brewers has been on a tear in the last couple years with the stock vaulting from 8 to 60 in a little less than three years.  Earnings increased 60% in 2007, 48% last year and is expected to increase 81% this year.  Yes, the company isn’t showing any signs that the growth is slowing with 4 straight quarters of accelerating sales growth.  While this is a company that should continue to do well as more people save money by brewing coffee at home, it’s well overdue for a correction and the pieces are in place for a healthy downward move.

Read Entire Post “Green Mountain Coffee (GMCR) Head & Shoulders Top” Here

I’m short on time this week, so will move right into the charts.  Basically not much change in my analysis from last week as the indices continue to diverge with Nasdaq strength and S&P weakness.  The Nasdaq actually broke out of its two week consolidation on Thursday, closing the week above the 20 day moving average yet again.  Amazing.  I don’t think too many would have predicted the Nasdaq would close above the 20 by the end of the week after plunging Monday and Tuesday to test the 50 day moving average.  Support at 1800 is back in play, with 1750 now shaping up as strong support as well. 

Read Entire Post “Market Divergence Remains – Nasdaq Strong, S&P Head & Shoulders Top Potential” Here

The indices are down but not out.  That was the theme of last week as the indices broke down out of tight, short trading ranges and are in the process of testing some key resistance levels which could soon tell us whether the rally will continue or enter a prolonged retracement.  Last week, I discussed the developing head and shoulders formations, but it’s much too soon to tell whether those topping formations will confirm.  For now, the Nasdaq remains remarkably strong and continues to trade above its 20 day moving average and actually looks poised to continue moving higher.  Contrast that with the Dow and S&P which closed the week below their 20 day moving averages for the first  time since the rally began in March.. so certainly some divergences and contradictions taking place that makes the current market a bit difficult to read.  I am leaning to the cautious side.  Tech and commodities have been the backbone of the rally and with commodities showing signs of cracking last week, perhaps they lead the market to the downside.  Let’s take a look at some key support and resistance levels I’ll be watching on the major indices next week.

Read Entire Post “S&P500 and Dow Breaking Down, Nasdaq Remains Strong” Here

I’m short on time this weekend so will keep the commentary to a minimum and just focus on the chart of the Nasdaq and what it might be telling us about where we’re headed.  The market is definitely showing some signs of fatigue recently but continues to digest gains in a very health manner and could very well be coiling the spring for another push higher, quite possibly to the next level of major resistance which in the the case of the Nasdaq is in the 1900 – 1947 range.  Note that the 50 day moving average has now crossed above the 200 day moving average, forming “the golden cross” which is a decent indicator of a bullish market. I still think we’re probably setting up for one last push of a few percent which would market the top of this leg up before entering a significant retracement phase. 

Read Entire Post “Nasdaq Flashes The Golden Cross; Coiling The Spring For Another Rally?” Here

One key component to pin pointing market tops and bottoms is the market reaction to news.  It’s something I’ve discussed quite a few times here in the past few years and with this V shaped market rally continuing into the stratosphere, it’s worth keeping an eye on to help determine when this rally might roll over for more than a few percentage points.  Certainly, there have been a few technical indications that the rally is cracking in the foundation, but the house that the bulls built remains standing for now with Dow 9000 and S&P 1000 in the cross hairs.  I mentioned last week that the inability of the bears to take control for than a day or two with buyers stepping in each time at key levels increasing the likelihood of an upside breakout out of consolidation.  On Monday, we got the confirmation of Friday’s strange end of day breakout, so the next leg up is in process.

Read Entire Post “Market Sells The Green Shoot, But S&P 1000 Still In Sight” Here

Sina.com (SINA) is China’s largest internet portal with over 200 million registered users across not only China but Taiwan, Hong Kong, North America.  The company continues to post outstanding growth each quarter despite a slumping global economy and beginning to tap into the trend of user generated content with the launch of SINA Blog and SINA Podcasting.  Considering that collectively, Chinese internet users spend more than 10x the amount of time online as US users do, that’s a whole lot of user generated content and potential ad revenue.

What stands out to me in terms of its financials is the fact the company has been posting accelerating quarter over quarter revenue growth over the past two years.  Ok, well not quite .. in the last quarter the company reported revenue growth of 44% vs the previous quarter growth of 64% so the streak has stopped, but still mighty  impressive growth.  Quarter over quarter earnings growth is equally as impressive over the past 8 quarters with growth of 19%, 29%, 28%, 31%, 74%, 59%, 38% and 44%.  The company will report its 1Q 2009 results within the next couple weeks.

Read Entire Post “Sina (SINA): China’s Largest Internet Portal Breaks Out” Here

Once again the bears can’t take the bull (er, I mean ball) and score.  There have been several indications over the past few weeks that this rally is on the verge of falling apart and each time the market is one move away from a key breakdown, buyers step in and push this market higher.  Frankly, I’m baffled at the way the buying has taken place particularly over the past week and ESPECIALLY in the last 15 minutes on Friday.  Window dressing? Perhaps.  Goverment intervention/manipulation? Perhaps.  Whatever it was, it wasn’t natural which was the capper on a week of mighty strange trading action (the sustained rally after the consumer confidence number was also a head scratcher).  The thin, volatile market where choppiness and unnatural trading prevail, prompted me to move more to the cash side, until a firm break out (with volume) out of the consolidation appears.  With Friday’s move and the overall resiliency of the market, it appears the odds are increasing of an upside breakout move, but let’s put an asterisk next to that Friday move and await more confirmation.  It should be noted that technically, the Nasdaq broke out at the end of the day Friday but the S&P and Dow remain below the 200 day moving averages.  So, while the Nasdaq remains relatively in the free and clear up here, the S&P and Dow still face significant hurdles.  Suffice it to say, it’s going to set up one wild week of trading.  In my opinion, where the market finishes the end of next week will determine the direction for the next several weeks.  Be ready on either side at this point or better yet, go enjoy warmer days and longer nights while this bull/bear battle play out at key resistance.  Let’s take a look at the charts..

Read Entire Post “Bears Can’t Confirm Double Top, Is Another Rally Imminent?” Here

I’ll keep it brief and to the point in this shortened Memorial Day weekend edition of the weekly market review/preview.  The market appears ready to roll over with the indices possibly confirming a double top formation in the coming days.  Take a look at the Nasdaq and S&P, both of which nearly retested the May highs before selling off and taking out the 20 day moving averages (the first time the S&P has traded below the 20 dma two consecutive days since the rally began in March).  If in fact the indices take out the May lows (and it looks like they will), that would confirm a double top formation and a likely test of the 50 day moving averages (in blue).

On Wednesday night I made the following comments to my members:

“Today’s high may have marked the top…

After Monday’s big move and the way the gains were held Tuesday, I
commented to Gold members last night that a move to the 200 day
moving averages in the S&P (around 940) and Dow (around 8800) is
becoming more likely. We may not get that far.  While the market
staged a decent rally in the morning today, that rally completely
fell apart following the Fed minutes.  It may have had something to
do with the Fed waking up to reality and revising their estimates for
GDP and unemployment downward. 

Read Entire Post “The Rally Is Rolling Over, Test of 50 Day Moving Averages Likely” Here