Stock Market Bear Rally In the Works?

I have been looking at the major stock market indices closely lately for signs of a real rally. The Russell 2000 index of small-cap companies ticker IWM has shown rising support levels in an uptrend. There isn't confirmation of a new trend up yet but the setup is there. So many stocks are oversold near-term I see a bounce in the market as a likely scenario. If we don't bounce here there will just be a much bigger short-term rally in weeks to come. Here is the support area on the bottom yellow line for IWM. It's a pretty solid level that keeps getting support. There is also a downtrend breakout seen over the top diagonal yellow line. We are testing this level currently. It's roughly the same with SPY QQQ's.

You would think tech would need to be strong to see a market rally and it is making progress here. I put a bollinger band up on here and you can see when it breaks through either top or bottom the momentum continues awhile. I'd like to see it break over the red line also. That's been a key level. Let's see what it does next week.

The small-cap put to call ratio is showing historic signs of a bottom forming.

I noticed the energy sector is making multi-month highs. XLE has been very strong. My understanding is that crude oil is in a sweet spot for their margins. Still I wouldn't expect such a big move and if the market is going to rally a bit something has to lead right?

Possible Rally Setting up on Stock Market

I posted on my trading blog DynamiteStocks.com about a potential major low taking place right now on the major indices. Here is a chart of SPY the S&P 500 ETF. The breakdown failure was of epic proportions and a top 10 percentage reversal from 52 week lows in history. The red day yesterday is now wiped out too as the market ripped all after hours session. I am not looking to get into any multi-day short positions at this time as I think this rally could get legs. In 2008 at market lows there was a fairly similar bear trap. It is too early to tell if this is a long term bottom but it has the makings of what could be. I remain neutral day to day to see how it plays out but this has my attention. Failed signals can be powerful chart signals.

Watches for 9/16/2022

IRNT is still short bias. Management canceled the conference call, refused to provide earnings guidance and the CEO quit all just now.

Some Short bias

XLE NERV MPLN STAR WISH NAIL JWN EXPR

Some long bias

PXMD FREY JWEL JDST

Long and Shorts Continue To Work

It sure has been awhile since I posted here. I've been busy with daytrading full-time. I continue to be amazed at how many long biased traders there are along with stocks running up staggering amounts. This past week we saw the IPO frenzy long and short. I've been shorting IPOS like FRZA and longing bounces on ones like PXMD. There is never a lack of opportunity long or short in this market. It's such a bullish market at times stocks with high short interest and 30% of the float short or more have been squeezing. Stocks like APRN FAZE VERU. FAZE might just run again. You can also find easy opportunity on the short side shorting multi-day breakdowns on stocks like PETQ YSG. There are crazy supernovas to short like NERV recently as well. I recently started using Tradersync.com to track and analyze my trades. I have found a lot of success trading Crude Oil long and short with options and stock via USO. It trades well off technicals in trends.

I recommend Tradersync if you are investing even as it tracks your performance. The other popular one is Tradervue. You can just save your trades from your broker with a couple clicks and upload directly to Tradersync or Tradervue.

On the long side CLAR stock dropped over 40% on no news or catalyst. Management came out with a statement that they intend to buy back stock. I see some rotation into fertilizer plays like LXU CF BIOX now. I like the fundamentals on NU going forward. Looks like they will grow earnings very well.

Technical Analysis of Crude Oil and Russell 2000 Index

Small-caps gauged by the Russell 2000 index or ticerk IWM made a failed bull signal on the breakout attempt in late March. I circled the day it started then failed to hold. A failed signal can be a powerful chart pattern. I expect us to test the lows soon and most likely blow through support much lower. Likely the S&P 500, Nasdaq, Dow Jones will follow. The next chart is the important price of oil. This is USO the ETF for crude oil futures. It is trying to find support on this trend-line I drew. It is currently a triangular bullish consolidation chart. The next couple days will be very telling on the next direction of oil. If it goes down the next couple days the run on oil could be over. Mortgage rates just rose at a historic pace and I expect the housing market to slow down. I think it's likely the economy slows significantly.

Oil chart

Russell Small-caps (IWM)

Bitcoin Double Top Forming

Here is some brief technical analysis on Bitcoin and the ETF GBTC. It couldn't reach a new high last winter and looks to be a clear double top formation starting. I drew another red line where there is some support. If this support gets taken out and price keeps dropping that is confirmatin of a top and we won't see new highs for some time. The chart is telling us there is likely more downside to come. If one is asking "is it a good time to buy Bitcoin?" the chart is telling us to wait.

Oil and Energy Continue to Perform

Crude oil continues to breakout and show high relative strength. It is a momentum breakout even as the overall stock market falls and continues to put up big red days. I see it as a high inflation play but regardless it is unstoppable at the moment. I'm fairly overweight energy in my long-term account and have been trading USO calls.

I like PBR Petrobras here with it's high increasing dividend payouts. It has increased the dividend greatly the last three quarters and it looks like big payouts are in the future. The floor for dividend payouts is $4 bil according to the company for this year and they see this increased payout contnuing for a few years.

They have reduced long-term debt considerably. They are looking for 60%-80% of free cash flow to be payed out in divdends. I noticed the stock chart while screening breakouts and then I saw the high dividend. The yield with the stock at $14 a share is roughly a 14% div yield here if things go as planned. The worst case dividend yield scenario is a 4.4% yield. I'm bullish on oil and see this as a good pick up here. It is coming off a bull-flag today.

TLT Short Setup

Long-term T-bonds look like a top was in. It did a technical top formation and took out support. They have just rebounded and kissed right off the old support line that is now resistance. Very text book action going on here. The fundamentals are when rates go up bonds go down and it looks like that is going to play out if the FED is forced into a corner with rates because of inflation. I think shorting bonds is a good play here. I am looking at the TBT ETF.

Small-caps Lagging Large-caps

I've been posting on Twitter lately about how the Russell 2000 Index via the ETF IWM has been lagging behind the other major indices like the Nasdaq and S&P 500. Historically a lot of people believe small-caps are a leading indicator in the economy. It makes sense as they are one of the major employers in the country and a good gauge on the consumer. This inverse correlation has been going on awhile now. I think if the Russell goes down and breaks below this trading range it is a good signal that the majors will follow. I'm watching this.

Bitcoin Technical Analysis

Here is a long-term Bitcoin chart. From late 2020 through April 2021 it was a textbook uptrending chart. Notice the higher lows I drew under. When there is a "pull-back" it quickly recovers and keeps going. It did this four times as you see from my lines. It started going range-bound after the top as momentum slowed. The two orange lines show the rough trading range. It finds resistance, comes down and finds support and this continues. The crack of that support in late April was when momentum died off and it hasn't recovered. This was a "technical breakdown." Old range support is now resistance. It is more of a bearish chart at the moment meaning sellers are in control. It isn't a buy here unless momentum comes back and it starts to breakout to highs again. I see it just bouncing around going sideways or flat out crashing for a bit. The more I look at the chart the more I see a rounding top formation that I drew up in the second chart. This is definetiely a topped out chart.