$SPX FED DATES CREATE SUPPORT AT 1775 -- NUMBER OF STOCKS ABOVE THE 50 DMA IS AT A RALLY LEVEL -- $SPXA200R IS WEAKENING - NEXT RALLY MAY DEFINE MAJOR TOP -- $NATGAS BECOMES A LAUNCH FUEL -- GLD MOVES BACK BELOW THE 20 DMA -- FACEBOOK TAKES FLIGHT

$SPX FED DATES CREATE SUPPORT AT 1775... The stock market has returned back to the level that was first touched on the Oct 30th Fed meeting at 1775 as shown in Chart 1. After running back below 1750 in November, the reversal came in right after the large black engulfing candle November 7. Then the rally shot up, moved sideways for 4 weeks, creating a small head/ shoulders pattern between 1780 and 1810. November 11 and 12 made lows to close out all the stops just below 1780. The market started higher again. Then on the Dec 18th, the market went down, taking out any close stops again, only to reverse and shoot higher after the Fed meeting announced the first $10 B taper. This candle took out stops below 1775 and went all the way to the top of the range at 1810. The Market shot up to 1850 to close out the year on Dec 31. After making some lower lows, the market tested the highs again and rolled over to the same level as the last two Fed meetings. That is a tale of very similar price action between both meetings. Now we set up with a potential head and shoulders top with a left shoulder at November 31, the head at January 15, and we will see if we get a right shoulder over the next 45 days. The Fed meeting is March 18,19. Bulls don't roll over easily, so I would expect some challenge of the highs soon. Guess where half way is? The height of the left shoulder, which is also the level of the slightly down sloping 50 DMA. Should be an interesting range to trade in.

(click to view a live version of this chart)
Chart 1

NUMBER OF STOCKS ABOVE THE 50 DMA IS AT A RALLY LEVEL... The $SPXA50R is a nice tool to look for short term trading entries. In Chart 2, we can see that when the number of stocks above the 50 DMA gets low, the market tries to rally. The Green box area is a nice place to look to start adding to longs on a big reversal day from down trend to up trend.

(click to view a live version of this chart)
Chart 2

$SPXA200R IS WEAKENING - NEXT RALLY MAY DEFINE MAJOR TOP... We can also use the $SPXA200R to help us find interim tops. Currently this might appear to be an interim term top, as fewer stocks are still above the 200 DMA as shown in Chart 3. The bull trend is weakening. From Chart 1 above, we should probably expect to build a right shoulder on the index. A larger divergence on the 10 year $SPXA200R shown in chart 3 would tell us the final rally is in place. Usually the market tops out when the percentage of stocks above the 200 DMA cannot stay above 70%. Currently we are at 70%. On this next rally, we need to see a wide number of stocks participate, rather than just a few. When more and more stocks get trapped under their 200 DMA, only a few stocks are making the higher highs. This is one way bull markets tell us of major corrections. When everything is trading below the 200 DMA, we are definitely in a strong downtrend. You can see we have broken the uptrend line on the $SPXA200R line. We are making lower highs for the last few months. This leads us to look for more topping patterns and add to defensive positions on rallies and sell winners near highs.

(click to view a live version of this chart)
Chart 3

$NATGAS BECOMES A LAUNCH FUEL... $NATGAS soared up to its resistance zone on Wednesday. The parabolic spike with 10% moves multiple days shown in Chart 4 is similar to how $SILVER topped in 2011. $GOLD was having $70 moves at its peak. Wednesday had a huge number of short positions stopped out above Friday's high. The price of $NATGAS does not usually wait for the warm weather to return before falling in price. In Chart 5, the longer term shows the base is in for Natural Gas. I would expect much higher prices in fall 2014.

(click to view a live version of this chart)
Chart 4

(click to view a live version of this chart)
Chart 5

GLD MOVES BACK BELOW THE 20 DMA... At the recent SCU 101 in Vancouver, we discussed GOLD. The question was asked: " Is the bottom in for GOLD? " My answer was "I am long GOLD above the 20 DMA, and out of GOLD below. This would be a sell signal for me today and a re- entry required if it moves back above as shown in Chart 6. All the indicators say GOLD wants to rally here, but all the other commodities are falling. Gold has been falling with other commodities since the commodity top of 2011, so I would suggest it would behave like a commodity until proven otherwise.

(click to view a live version of this chart)
Chart 6

FACEBOOK TAKES FLIGHT... Facebook soared on increased mobile marketing penetration in after hours. Today it is up 14%. The Social Media sector soared in sympathy with Facebook. You can see FB had massive volume today and made it to the top of the most actives.

(click to view a live version of this chart)
Chart 7

Chart 8