Looking at the Markets: A Technical Perspective

November 3, 2013 (10:30 pm)

S&P500 ETF (SPY) has broken out of a multi-month wedge, signaling bullish continuation as it remains above the 10, 20, 50 and 200 DMA’s. Its very long-term trend line is reaching into the low $180’s. May this be the intermediate-term target?


S&P500 ETF (SPY) has also been trading in a well-defined rising channel for multiple years. Interestingly, the top trend line is in the low $180’s – aligning almost exactly with the (very different) trend line above.


Volatility (VIX) is relatively low right now, signaling that fear is not a big factor in most investors minds right now. Further, it seems to be forming a bear flag, which could indicate that the VIX will continue lower (and, conversely, the SPY will continue to rise). It’s important to note, however, that a low VIX often precedes a correction.


Bank of America (BAC) has formed a head and shoulders pattern. It fell below the neckline as the MACD turned down, signaling significant downside ahead. Hard stop above $14.11, as that would invalidate our thesis.


Ford (F) has a significant, long-term trend line that has acted as support recently. It has also formed a multi-month rising wedge / consolidation pattern.


Google (GOOG) has formed negative divergence with both RSI and MACD. We expect more downside ahead. We’ll consider our thesis valid unless the shares rise above the all time highs (>$1,042).


Starwood Hotels (HOT) has broken out of a long-term multi-month ascending triangle and has now formed a bull flag. We’re long above the red box ($75 level), with a hard stop below it ($73.50).


LinkedIn (LNKD) has formed a long-term trend line that has acted as support until its recent earnings release. The shares are now trading below that trend line for the first time all year.


Las Vegas Sands (LVS) has broken above a year-long rising wedge. We unfortunately weren’t watching this one closely – otherwise, taking a position as it successfully re-tested the upper trend line would have been a no-brainer. It could be forming a bull flag here, but we’re watching from the sidelines for now.


SodaStream (SODA) has broken down from a multi-month triangle and has failed its re-test. It has since fallen sharply. There may be more pain ahead, but we’re watching from afar for the time being.


Yelp (YELP) has created what looks to be a classic bump and run pattern over the past year. It was trending above a multi-month trend line for the first six months, before it began to rally sharply for the past few months (forming a much steeper trend line). It has since broken down from that steeper trend line. In a classic B&R pattern, we’d see the shares re-test the original trend line, which now sits right at the 200 DMA. On a break below the 50 DMA, we’d go short the name.