Honestly today's stock market movement was disappointing to those of us who've been looking for the next great swing up (the buy and hold for days to perhaps a few weeks type!). This morning the market lost support as strange things happened with crude oil and gasoline prices which fell sharply and took down many markets, on the theory of less consumption (less inflation). That didn't bother me at all - I'd tweeted yesterday that oil, gold and silver were at resistance right in a potential turn time window, so we were ready for a drop there. But what about the stock market? Let's take a look at some cold market facts with a few of my favorite charts. First, the $SPX daily chart itself shows that it remains above easily-spotted trendline support, as I've marked on the chart. Second, the McClellan Oscillator (my $NYMO chart is in the middle) kissed back just above the zero line, so it's just as ready to push back upward (okay, unless it drops to negative). And I've marked one of my favorite trendlines on the $NYMO showing that it's been making higher lows, which is normally bullish although this time there's an overall contracting pattern (which will yield a great move when it breaks out). Third, check out the TRIN chart at the bottom - it's definitely giving a bullish signal. Let me explain.
(click any chart to see it larger)
The TRIN chart at the bottom shows that, on this daily chart I keep, the 10-day moving average (10-dma) is above 1.20 and that's a classic swing buy territory as defined by the TRIN's inventor himself (Richard Arms, inventor of the "Arms Index" we use as the TRIN). Not only that, but even longer-term moving averages like the 20-dma and 13-dema (13-day exponential moving average) also are above 1.20. You can even see from the indicators on this chart that StockRSI is right at 100% - cannot get any more "overbought" than that. Since TRIN is inverted, this indicates that the stock market is very oversold.
While it is true that a market can always remain or become more oversold, these are extreme TRIN readings that support the notion of looking for a snap upward. Given where the McClellan Oscillator is (and yes, you can see the McClellan Summation Index showing positive in that lower indicator window of the $NYMO chart, in the middle below), and with the $SPX still in positive chart territory, I'm going to remain in the camp of looking for more upside movement.
I'd like to note as an aside, it is very interesting to see all the market consolidation that's gone on as the $SPX has tested around 1332. I placed a horizontal support/resistance line onto the $SPX chart there. That level is double the 666 level (or 667 level, in which case double is 1334) - i.e., the level at which the $SPX has doubled in price since the March 2009 low. Doubling something is a Fibonacci extension. So we shouldn't begrudge the market for treating it as something of a magnet, whether or not we see 1334 actually touched again tomorrow. I almost wonder if this is part of what Raymond Merriman meant when he said that the market's upward movement could become less of an express train ... we'll see.
As for options expiration (opex) - as @MrTopStep has often noted, and reiterated in a tweet today, tomorrow as the Thursday during the week prior to opex is commonly a dip buying opportunity. There's a fairly common trading pattern in which the Thursday during the week prior to opex presents a low that can be bought for a profitable long-side swing into that opex, or at least for a few days. Maybe that's what the market is waiting for as well.
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