The Stock Market Swings From Bullish Signs to Stop Signs.
A snipper from my latest post.... drduru.com/onetwenty...108-update-160420-2/
The stock market faded from bullish undertones and back into the resting position. Now we can just look back at what could have been.
For the first time in a long time, I feel compelled to change my short-term trading call from neutral. While the S&P 500 (SPY) still sits well within a trading range of churn, I see several signals which give me bearish vibes starting with my favorite technical indicator: AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs).
Through Wednesday, April 18th, AT40 rallied relatively consistently with 9 up days out of 12 trading days. The last two up days featured weakening momentum and the top, an intraday high of 67.6%, came just short of the overbought threshold of 70%. I typically interpret a rejection at the overbought threshold as a bearish event. I am particularly keen to follow this interpretation given a similar rejection preceded the big February sell-off, and I was very slow to react to that rejection. AT40 swiftly fell all the way back to 55.2% to close the week. I am now eager to see AT40 hold a higher low.
The S&P 500 (SPY) provided one component of a bearish confirmation. At its last high, the index closed just about even with its close after the Fed’s last decision on monetary policy. Not only did the index fail to maintain momentum from there, but also the subsequent selling pushed the S&P 500 right back below its 50DMA. The NASDAQ and the PowerShares QQQ ETF (QQQ) both pulled up short of their post-Fed closes before dipping below their 50DMAs to the end the week.
The volatility index, the VIX, might as well have sealed the deal. Last week, the VIX traded right down to the 15.35 pivot and convincingly held that level as support over the next 3 trading days. While the VIX did not pop as much as I would have expected, I am still respecting this hold of support. I am staying patient before shorting the iPath® S&P 500 VIX Short-Term Futures™ ETN (VXX) again, and I am holding onto call options on the ProShares Ultra VIX Short-Term Futures ETF (UVXY).
The Australian dollar (FXA) versus the Japanese yen (FXY) provided one more piece to the puzzle by breaking down below its 50DMA again. Just a week ago, AUD/JPY looked like it was leading financial markets higher. Now it looks set to grease the skids pointing downward....
The stock market faded from bullish undertones and back into the resting position. Now we can just look back at what could have been.
For the first time in a long time, I feel compelled to change my short-term trading call from neutral. While the S&P 500 (SPY) still sits well within a trading range of churn, I see several signals which give me bearish vibes starting with my favorite technical indicator: AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs).
Through Wednesday, April 18th, AT40 rallied relatively consistently with 9 up days out of 12 trading days. The last two up days featured weakening momentum and the top, an intraday high of 67.6%, came just short of the overbought threshold of 70%. I typically interpret a rejection at the overbought threshold as a bearish event. I am particularly keen to follow this interpretation given a similar rejection preceded the big February sell-off, and I was very slow to react to that rejection. AT40 swiftly fell all the way back to 55.2% to close the week. I am now eager to see AT40 hold a higher low.
The S&P 500 (SPY) provided one component of a bearish confirmation. At its last high, the index closed just about even with its close after the Fed’s last decision on monetary policy. Not only did the index fail to maintain momentum from there, but also the subsequent selling pushed the S&P 500 right back below its 50DMA. The NASDAQ and the PowerShares QQQ ETF (QQQ) both pulled up short of their post-Fed closes before dipping below their 50DMAs to the end the week.
The volatility index, the VIX, might as well have sealed the deal. Last week, the VIX traded right down to the 15.35 pivot and convincingly held that level as support over the next 3 trading days. While the VIX did not pop as much as I would have expected, I am still respecting this hold of support. I am staying patient before shorting the iPath® S&P 500 VIX Short-Term Futures™ ETN (VXX) again, and I am holding onto call options on the ProShares Ultra VIX Short-Term Futures ETF (UVXY).
The Australian dollar (FXA) versus the Japanese yen (FXY) provided one more piece to the puzzle by breaking down below its 50DMA again. Just a week ago, AUD/JPY looked like it was leading financial markets higher. Now it looks set to grease the skids pointing downward....