Holiday Weekend Update

Things can certainly change in a hurry and that's especially true when viewing charts on very short time frames. While the strength on Wednesday and Thursday appeared to have the bulls poised for another leg higher, Friday's action saw the bears battle back.

Looking at the S&P, prices are now below a declining 5 dma for the first time since mid-December. We also saw a trendline break and prices managed to find support at 1131 again. I pointed out in the comments section of the blog on Friday that support may be found there and indeed it was. We may see a continued bounce on Tuesday to test the 5 dma and the trendline from the underside (red highlighted circle). This is often the case after a breakdown and I'll be watching that level closely for an opportunity to add to short positions and possibly further reduce long exposure...


The green highlighted box in the chart above around 1110 is the approximate target for the double top pattern that would confirm on a move below about 1131. Sellers have been found at 1150 and here's a closer look...


I see the price action on the DOW as more of a rising wedge pattern that was confirmed with Friday's action. This bearish reversal pattern also completed a retest with the bounce late in the session. The next level of support worth watching is near 10,500 and prices are now below a flat 5dma...


The Nasdaq has yet to break trendline support, but if it does, the next level of significant support is about 80 points lower. Prices here are trading below a declining 5 dma...


In case you hadn't noticed, the almighty dollar had a significant pop on Friday. While much blame was placed on "poor reactions" to INTC and JPM earnings for the drop, I believe the truth lies in the move of the dollar. Looking at the 30 day, 30 minute chart shows prices back inside the down trending channel and above a declining 5 dma. The trend continues to favor more downside here with Friday's action filling the gap from 1/11. Additionally, I highlighted a couple of other recent bounces above a declining 5 dma that proved to rollover rather quickly. I still give the benefit of the doubt to the dollar bears here until the 5 dma turns back up...

Click Any Chart To Enlarge

I'll be back tomorrow with a Pattern Watch post and will likely scan for a few more short opportunities than usual given the current state of the market. Enjoy the weekend!