I have to tell you that I was confused by the 5pt gap up in the S&P futures last Sunday evening. I was further confused by the intensity of the rallies on Monday, Tuesday, and Wednesday. When you see a rally of 33pts over three days on nothing, you just have to wonder. Because the P/C ratio dropped to .66 and the $TRIN closed at .64 on Wednesday, I did expect a pause for Thursday, but I was totally blindsided on Friday as I fully expected they were going to run $SPX to 1900. The measured move on the break out of the symmetrical triangle pattern would take $SPX to about 1910 and that still could happen but right now we're back inside that pattern which suggest this was a false break out. Confirmation of this false break out theory would come with a break of the lower triangle line now at about 1845. (Edit: After taking a closer look at the $SPX symmetrical triangle, I see that the bottom of the triangle pattern is closer to 1850 than to 1845, so this 1850 area becomes much more important as a support level.) But we're not there yet.
In the meantime, $SPX has moved back inside the upper consolidation range. The bottom of this particular consolidation is 1850. I don't know that $SPX will hit that as Friday's big sell off might just be a one-day event, but if Friday's sell off proves to be more than a one day event, then you just have to expect 1850 will be tested and perhaps fail. Since so many of these consolidation periods have led to pull backs, then, until $SPX breaks back above 1884 with gusto, you just have to on the look out for a break of 1850 in the first few days of the upcoming week.
With $SPX up less than 20pts for the year and with QQQ's, IWM, IBB, and $COMPQ in negative territory for the year, it should be obvious to everyone that there is something wrong with the markets. Are we witnessing a major distribution phase similar to those of 1999-2000 & November 2007, or are we just going to consolidate between the low 1700's and the high 1800's in preparation for the next move higher? I don't have an answer but surely the market will show its hand before too much longer, or famous last words. For now, and until we do get a clear directional signal, caution is the word of the day.
IMHO and subject to change without notice.
GL in the week ahead.
In the meantime, $SPX has moved back inside the upper consolidation range. The bottom of this particular consolidation is 1850. I don't know that $SPX will hit that as Friday's big sell off might just be a one-day event, but if Friday's sell off proves to be more than a one day event, then you just have to expect 1850 will be tested and perhaps fail. Since so many of these consolidation periods have led to pull backs, then, until $SPX breaks back above 1884 with gusto, you just have to on the look out for a break of 1850 in the first few days of the upcoming week.
With $SPX up less than 20pts for the year and with QQQ's, IWM, IBB, and $COMPQ in negative territory for the year, it should be obvious to everyone that there is something wrong with the markets. Are we witnessing a major distribution phase similar to those of 1999-2000 & November 2007, or are we just going to consolidate between the low 1700's and the high 1800's in preparation for the next move higher? I don't have an answer but surely the market will show its hand before too much longer, or famous last words. For now, and until we do get a clear directional signal, caution is the word of the day.
IMHO and subject to change without notice.
GL in the week ahead.