1-31-2022: SP500 Daily Analysis

SP500 has two good rallies in a row, both of them closed at the high of the day, these are good signals that buyers are in control. SP500 is encountering resistance at 4500 level, this would be a good test for the buyers to show their strength. Another point is see close were the last 3 down bars closing, will all the volume, SP500 shredded only 25 points, which tells it going under absorption. 

Three scenarios can happen.

1. If we fail to penetrate the resistance level and price falling with good spreads and with good volume (can happen with low volume also, it means buyers stepped out) then there is high chance of SP500 falling again and retest 4300, need to watch on this. 
2. If price penetrates the resistance with good spread (that means buyers are aggressive) and good volume and 4225 is bottom, we may not retest it again. 
3. If Price hits resistance and falls moderately with low volume may touch 4440 to 4420 levels, then its considered as bullish as sellers are not aggressive and price has to rally from here.

Earnings are helping either side of the case. Apple earnings really turned around the sentiment and boosted the morale. Apple rallied from bottom of this rally and accrued 12.3% vs SP500 rallied 6.8%. If the stock market is going down, Apple would not rise up this much, another way to look up. Apple is the leader and its leading the stocks right now.

From a Wyckoff analysis, SP500 formed a small trading range, it shows characteristics of a re-accumulation. See both charts below of analysis. Today rally is considered as Sign of Strength (SOS). SP500 may re-test resistance line formed at 4420, this depends how SP500 act next coming days as mentioned above in three scenarios.

  

                        

Tesla Analysis with Wyckoff Method

1-27-2022:

As I mentioned in yesterday analysis, TSLA is trading range with distribution bias or characteristics, today the price action confirmed it. Price pierced through 890 demand line. Good effort (volume) resulted in good result (high spread bar), both price and volume are in sync. 

Based on Point and Figure chart, this whole distribution range from UT to BC has a cause, which leads to price reaching 670 levels and maximum 550. 

If you are long on Tesla, take appropriate measures, either buy puts or trimming it down. 

1-26-2022:

This is going to be my first analysis on TSLA. Obviously TSLA had great run and now its in consolidation/trading range, now my goal is to use these clues and make smart decision whether stock is going up or  down in medium term and profit from the moves in either case. It made higher high in Nov at 1243 and made higher low in Dec at 890 and touched 850 intraday on 24-Jan-2022 . Attempted to up in Dec-2021 but failed short at 1200 price level where it encountered huge resistance but found support again at 980 and finally broke 980. So from daily levels 1200 resistance level and 980 and 890 support levels are very crucial, watch the price carefully when stock around this level.

Relaying Tesla chart with Wyckoff distribution schematics will help in deducing some clues (remember Distribution and Re-accumulation schematics looks almost same until end of Phase B and start of Phase C). Even though I mentioned Tesla is in trading range in the start of this article, the reason for having some bias towards distribution is what's happening in 2022. Lets say if Tesla is trading range and bias is towards accumulation (re-accumulation), we should not be seeing these high spread bars at the end of phase B, even though daily bar on 24-Jan can be considered as spring. So the question is whole price pattern from 2022 starting to till is Sign of Weakness (SOW), if that's the case then Phase B are already ended with Bar on 3rd-Jan. Also another clue that is suggesting this is distribution is volume during 2022 move, its higher than for the same price from 1-Dec-2021 to 26-Dec-2021, if this is accumulation volume should be low and price spreads for downward movement should be lower, but that's not the case. So I am having bearish bias on  Tesla until it disconfirms this and re-test spring with lower volume and then moves higher with good spreads. Tesla can encounter resistance at 980 to 1000 region.

Planning to walkthrough Tesla chart with Wyckoff method going forward. Will provide updates only if interesting and worth mentioning happens in the chart. 

1-26-2022 : Daily Analysis

 

Today SP500 ended 0.15% lower, but not much can be infer just from close to close unless we see daily chart or hourly chart. There was big battle between buyers and sellers through the day and sellers won once FED news released, sellers drove the market to almost 4300 and then buyers stepped in regained 49 points. As I mentioned yesterday, SP500 is in trading range and in Phase B, which experience lot volatility from these moves and news as well. 

Just stepping back and seeing SP500 from a bigger picture, still its not good news, its struggling at 50MA line and at the critical juncture. This chart provides more clarity on the Buyers and sellers battle and looks like both are in control. 

Going back to hourly chart with Wyckoff labelling to see more granularity, SP500 hits resistance line and spend sometime around 4425 levels, buyers could not push the price, as the FED news came in sellers took control and ended with buyers having some say, also one could observe there is lot of volume on the last 60min but the price did not decrease with same level, so there is divergence of effort  vs result, lot of effort (volume) produce less result (price), this can be construed as buyers stepping in and absorbing sellers. As of this writing ES heading lower and trading at 4284 and seems its going to retest 4250 level. What happens here would be key for next couple of days. Any breakdown lower than 4025 would unleash hell atleast temporarily. 

1-25-2022 : SP500 Daily Analysis

SP500 attempted to go down in the morning and turn back again by the end of the day. Did not retest 4220 level intraday, which is good thing for bulls, this shows bulls are aggressively supporting price in this level. 

From a Wyckoff methodology, we had SC and AR yesterday and Secondary test (ST) happened today around 4300 level. This completes Phase A, now SP500 enters Phase B. In Phase B, price spread can be erratic and so do volume and buyers and sellers try to take control, so lot of volatility expected in coming days, also there is high chance it will retest 4220 level in Phase B. SP500 is in trading range now, coming days will dictate whether market goes higher or lower. Will discuss more on this as it unfolds. 

1-24-2022 : SP500 Daily Analysis

SP500 fell almost 4% intraday and closed with +0.28%, that's huge turn around. SP500 dipped through 4300 support and stayed atleast 3 hours before turning around and managed to close above 4410. As I mentioned in yesterday report, touching 4300 is highly likely (and happened now), how the price behave at that level sets the tone of the next phase. Its remarkable that buyers are showing up at the level they are expected and supporting the price, any weakness in this area is a big trouble for bulls. 

As I mentioned that the above structure from Nov-21 to early Jan-22 is a distribution structure (for more information on the distribution read first article in this blog). Below picture is one to one comparison for the structure and labelling. 

Today selloff is similar to Selling Climax as described in Wyckoff methodology and the rally is called automatic rally. In the coming articles I will be presenting this structure as market unfolds. 

OK, what happens if this is Selling Climax?:

If today price action is actual Selling Climax (SC)and followed by Automatic rally (AR), then comes secondary test (ST), which means price is going to test 4225 again (as of this writing ES is at 4358, down 50 points from high). This concludes Phase A, then comes Phase B, which will have high spread and volatility moves, if buyers shows up and absorb the supply at  this level then we could through series of tests and then this whole structure becomes accumulation, otherwise it will become distribution and more selling will come. We will walk through this as market unfolds. 

VIX has risen to 39 and closed at 29.9, that's huge change, this also confirms, buyers are stepping and fear is subsiding for now. 

Charts used from Stockcharts.com

1-21-2022 : SP500 Daily Analysis

 Note: This analysis posted on 24-Jan-2022, but was done on prior to market open on 24-Jan-2022.

Fear has not subsided, initial enthusiasm in the morning met by lot of pessimism and fear. SP500 lost another 1.9%. On Daily basis cracked under 200 SMA at 4429, which considered to be good support in general, but fear is involved, nothing matters and there was no fight from bulls, bears are pounding again, evident based on the close 4397, big stocks falling like house of cards. On 1-19-2022 analysis report, I asked are we going below 4500?, last couple of days we crossed 4500 level and went below and now there are high chances we hit under 4300, based on what happens there will determine whether we go and touch 4000 as I have mentioned that could one of the targets for this downward moment.

One more thing I want to mention, and I am convinced that there is lot supply coming to market and that is yet to be absorbed, this will take time and will see further downward movement until supply is exhausted. Whole 4-Nov-21 to 12-Jan-22 structure is a distribution and the downward movement both in terms of price spread and acceleration is high since March-2020, this is what I mentioned in the last report, if we break 4500, this structure becomes distribution. There are few scenarios that plays out.

1. We rally from here to 4500 and met with huge resistance (supply) and continue the downward path till 4300 and again we need to revisit based on the clues what happens at that support level.    
2. Another one is, we straight away go to 4300 level and bounce back as it has some support level and then can continue downward movement if demand is overwhelmed by supply at that point, need to wait and see.

VIX, the fear index, as called informally, is rising from 23.85 to 28.85 since we discussed last time, that’s 20% rise in two days, a lot. This is proxy of what happening the market. This will show whether market is becoming or nervous, right now that is the case.

Ok, what happens if this structure is distribution?

Stock Market goes through cyclic bull markets and bear markets within secular bull and bear markets. Secular bull markets stay for 20 years and secular bear markets for 12 year, atleast this what happening since 1950s, except in the bear market from 1930 lasted for 20 years. Below is one of my favorite charts, I got this from article by Tom Bowley. We are still in Secure bull market, so there is long term bullishness, no doubt about it, but within secular bull market we can cyclic bear markets and bull markets, example the one happened in 2020. Its quite interesting its happening now after two years (atleast I did not expect this cyclic bear market happening so soon), but we will tide this one soon.

 

As I mentioned above, we can see SP500 coming to 4300 and to 4000, its possible (highly). But What I always want to look for is, is there something else worst and wanted to atleast acknowledge and get prepared for it. Based on the Fibonacci levels from the March 2020 lowest to Jan-2022 highest level, 38.2% comes at 3850 level. There is some possibility we can hit if things get worse. I am not putting this here as placeholder and if it happens then don’t want to claim I said so, that’s not the intention here. Want to see, whether things can get worse before they get better. This worst-case scenario, this gives perspective whether to sell out and sit this one out or hedge or trim your portfolio. Earnings season will decide to some extent whether we go here or not. My recommendation is trim it if you can, especially stocks that went very high and not profitable companies. Companies with good earnings always recover after math.