Breadth, as measured by the McClellan Oscillators for both Nasdaq and NYSE have turned bearish in recent days. NYMO summation values, shown in the lower panel crossed, setting up a bearish trend. Support as delineated at previous breakout levels, intensifies at the 10950 (+/-) zone. A descending pattern has been printing for the past two weeks, which also converges at the same level.
From a bullish perspective, this same pattern represents a bullish flag. Therefore, bears still have a lot to prove, should this be typical year end selling. The post-election ramp is still pretty strong.
NAMO and NASI are weaker by comparison. Price action dipped below the previous breakout zone at 4910.00 (+/-) light dashed red horizontal. The bearish cross in NASI, lower panel, is more pronounced. 4750 seems like a reasonable target.
The FANG stocks represented by Facebook, Amazon, Netflix and Google all saw their share of selling into the close yesterday. Support levels are being broken.
Facebook price action remains below the 9/20ema. Both moving averages are heading lower, therefore we remain bearish until price pushes back above these key trailing averages. The 200ma is overhead as well. Look for first rejection on any bounce to re-short at these levels.
RSI is dropping fast, with bearish momentum present in MACD. Stochastic is oversold. We assume this oscillator will embed in the short term.
Retail didn’t fair well this season. AMZN reflects the sentiment. Price action appears headed for the 200ma at 734.20, as RSI moves lower. MACD and stochastic are confirming. Ultimately, price is below the 9/20ema, so we remain bearish here as well.
Netflix could manage a rebound from here, though RSI suggests we continue lower in the short term. Price action has moved below the 20ema, after a galant effort by the bulls on Tuesday. Bears took over, forcing a bear cross on MACD, when price reversed into an outside day or bearish engulfing candle. Thursday and Friday finished off the remaining bulls. If this turns out to be a range, support is represented by the horizontal shaded band between 110.00 ~ 114.00.
Google shows similar thoughts. RSI dropped through 50 this week, confirming its bearish trend. Price closed below the 9/20ema and 50sma on Friday. This action suggests more could follow.
Apple is showing a paradoxical pattern. This could be either a double top, or a cup and handle, with the latter forming over the past week. RSI is still above 50. Less we forget the massive (VBP) volume by price support, bears have a lot of work to do to “keep the doctor away.”
This only represents 5 major stocks, yet as we often note, when “The Generals” fail or worse, fail to confirm, we must take note. Presently, the signal they give us is more bearish than bullish. The caveat is, the time of year. This leaves you but one decision in the new year, watch for confirmation.
CES starts next week, therefore, if “The Generals” bounce, look for the market to follow. If they fail, reduce your exposure. It’s that simple.
In retrospect, this has been a great year. Charter members in the trading room have developed markedly, as we watch you trade with “strategy and rules based” decisions each day. I am so proud of all of you, much as a father would be for his children. As cliche as that sounds, I mean every word of it. You are remarkable traders and should be proud of your team work. I am blessed to know you as family.
It seems fitting that one of our favorite stocks this year was Nvidia. What a great trade that was, up nearly 300% in 10 short months. Congratulations to those of you who traded this beauty, as it triggered at 32.25, exploding to 52 week highs into the new year.
To the new members, we welcome you to a very different trading room. We have no agenda, other than to help each other. We share our thoughts herein, therefore we all benefit.
Happy New Year 2017,
Vinny
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