I'm really updating the intraday charts here and the cycle or broad market mini cycle / base from Jan. 14-16th, but I did notice something similar to AAPL, both assets (NDX Biotechs & AAPL) are influential in the NASDAQ (even though Janet Yellen specifically came out and essentially said, "The rest of the market is fine, but Biotechs and Social Networking stocks are frothy".
In any case, it's a little bit interesting that our charts from last week suggested that the Russell 2000 outperform and the NASDAQ is the laggard today. From
The Week Ahead on January 23rd...
"I think the IWM/Russell 2000 outperforms the other averages early in the week as it has not met minimum targets and has some better looking charts relative to the others."
I did add some longer term IBB (NASDAQ Biotech Index) charts just because of the similar situation described in the AAPL Update just posted and more broadly, the head fake concept.
This is the daily IB (NASDAQ Biotech Index) chart.
Note the same resistance level that is present in AAPL. There were a couple of pushes above intraday that failed, but the a breakout above the area in yellow, also take note of the volume on the "breakout", not exactly inspiring for a breakout,
This is a 4 hour chart (3C) of IBB, I drew in the same trendline, it looks a little different because you are seeing intraday activity rather than the trendline across closing activity, but the same area. Also note that 3C is generally in the same place between points "A" and "B", which is essentially confirmation that nothing big has happened between those two points in similar price,
however as we have been talking a lot about even before this most recent bounce got moving, because of the large size of positions and the supply./demand dynamic and a market that is seeing some really thin liquidity, especially in futures, we only expected to see negative divergences in to higher prices and just as soon as price crosses above the "breakout" area (yellow trendline), look at the very obvious change in character of 3C, a leading negative divergence.
I actually like this indicator a lot, Don Worden's Money Stream. I don't use it a lot because often it's not very detailed or misses some stuff, but when it is giving a good signal, it's really like 3C in that when a divergence jumps off the chart and you don't need to search for it (as with any indicator), those tend to be your best signals, especially if you can confirm them in multiple assets, multiple timeframes and multiple indicators that you trust. Again, at the breakout level Money Stream (daily) leads negative.
I'm really just trying to show the bigger picture, but this is generally the kind of head fake move and confirmation that I like to use to my advantage.
The 60 min chart has a bit more detail with a negative divegrence in to the October lows which is the same divergence seen at the head fake levels in the averages in September that led to the October lows and of course that base that formed that we described as leading to a "face ripping rally", but again it's the large leading negative divegrence to the far right.
And on a 30 min chart that was mostly confirmation in the timeframes, again a leading negative divergence at the same trendline/resistance area and break above.
This is just to establish a larger picture view as a refresher.
Perhaps some of this upside in bios that can really move (despite Yellen's warning on the Industry) is due to the NASDAQ Composite's breadth which is not good. Below is the NASDAQ COMPOSITE, not the NASDAQ 100 (in red) ad the Composite's Advance/Decline line (green).
Note the leading in the A/D line through 2013 and the start of 2014, then look at what happens, the A/D line not only can't keep up with the Composite which is a much broader measure than the NASDAQ 100 or even the SPX, but it is leading lower, essentially more stocks are moving lower than higher. We've seen this same thing in a number of breadth indicators around the same time in 2014, in fact the percentage of stocks above their 40-day and 200-day moving averages has been well below 50% for a lot of the time, sometimes significantly below.
Now that a little bigger picture and the head fake concept and how we try to confirm whether a move is a real move or a head fake, it's really the intraday charts I wanted to update, I just thought that this situation was so similar to the possible scenario offered in AAPL, that it was worth posting as a concept.
As you have seen numerous times over the last week+plus, the base area in the overall market has been around the 14th-16th of January and largely on 3-5 min charts with a few exceptions. You can see the positive divegrence (base) in white to the left and at the green arrows, the 5 min chart's in line status, which is what I was talking about Friday in saying,
"I suspect it probably won't take too much longer (in to next week) for the bounce to start to fail, leaving us some good opportunities to set up some nice short positions or add to.
I am still waiting on a few leading indicators to give clear signals , but this can happen very quickly."
For example, I'd want to see this 5 min chart fail, note we've already seen a negative divegrence above on this timeframe which seems to be the most important for this particular cycle.
On intraday 2 min charts we've already seen the divergences getting ugly, looking a lot like the January 8th (and the next few days) with aggressive selling).
As you know, we look for the divergence to gain enough strength that it migrates to the next longest timeframe, and in this case, since the positives are largely out to the 5 min charts, that's what I was talking about above in watching for this week.
The 2 min divegrence above this chart is migrating to the next longest chart, the 3 min, also showing a negative divergence at the same place earlier around the 21st and leading today. The next move would be for this to strengthen and move to the 5 min chart, that's what I'm essentially looking for as well as a number of other indications like leading indicators, the levers, etc.
As I have often shown, the leveraged ETFs seem to give stronger signals earlier, this is BIB, the Ultra-long NASDAQ biotech ETF, note its 3 min chart looks a bit worse.
And the long term 4 hour BIS, leveraged Ultra Short NDX biotechs has a strong 4 hour positive divegrence.
When the 5 min chart fails, I think IBB short or BIS long will be very interesting, however as far as the divergences, they aren't too different than the broad market as you might expect as the broad market accounts for the greatest directional influence on just about any stock with Industry groups being the second most influential, the point being is the broad market updates are probably going to be showing just about the same thing as something like IBB.
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