$SPX off 2pts on the week but what may prove to be more important is that we're back in and stuck in the previous month long consolidation that began in December, 2013 . Buyers who bought in late December and early January are sleeping better these days and they'll sleep even better if the markets can move up and out of this rectangular consolidation zone. On the other hand, those same buyers aren't likely to want to sit through another pull back and may be exiting now and their selling may be the reason the rally has stalled. If this is the case, then the markets are absorbing that selling with little damage done but I do believe that at the first sign of overt weakness we will see more and more of those December/January buyers hit the exits and their selling will beget further selling as the market full fills its own form of self prophecy.
To avoid an increase in selling, the market needs to clarify its intentions early in the coming week because right now the market is sending a mixed message. Fer instance:
$NYSI is rising and is now at its highest level going back to May of 2013 and this indicates that the market is moving up with broadening participation.
remains and is confirming this latest move off the early Feb lows.
$VIX 5EMA is at 14.7, well above the 13-12.5 area where it has turned in the recent past.
$TRIN closed at 1.46 on Tuesday, the 18th, when the $NYSE was up indicating a bit of stealth distribution. During the December/January consolidation, the $TRIN closed above 1. xx on several days when the market closed green so if you're you don't want to see something like this repeat.
P/C ratio closed at .69 on Friday which means that everyone is on the same side of the boat. During the December/January consolidation, the P/C ratio closed numerous times in the .7x area indicating a complete lack of fear by participants. We were not climbing a wall of worry and look what happened. So, again, we don't want to see too much bullishness from the P/C ratio in the early days of next week.
Despite the immediate above, I do believe that $SPX will make a run for the 1850 area early in the week and I also believe that we could see $SPX close out the week above that key level. Even though this is what I believe, the market may have other plans so stay on your toes until we clear this .
GL in the week ahead.
For the stuff I'm following now, it's very important that we print new closing highs for the weekly and monthly charts by next Friday. If $SPX can manage that, then this will set up negative divergences for the RSI and CCI in the weekly and monthly time frames and the last times we had these negative divergences happening at the same time was back in early 2000 and the Fall of 2007. So if we get a higher closing high at the end of the upcoming week and if we have non-confirmation by these two key indicators in the longer time frames, this is going to be, at minimum, a red flag warning. The market may just completely ignore these divergences but it didn't in 2000 and in 2007. For the moment this is nothing but speculation until we get the higher closing high and then see how the market reacts to the accompanying negative divergence.
By the same token, we are likely to get a new all-time closing high on the $SPX within a day or two but CCI is not likely to confirm this which will indicate to me that upside momentum is waning. Of course, I'm assuming we're going to get this new closing high but it might not happen.
Today we saw 2.8 billion shares traded along with another topping tail and/or upthrust type candle. Per Wyckoff, an upthrust candle should be accompanied by heavier than average volume. We didn't have that on the 19th but we have it now. This, of course, leaves me wondering if the measured move target of 1880/1890 is in jeopardy. Certainly we'll have a better idea in a couple of days.
However, we have a problem with two key indexes and a third may be joining them. The Dow and transports are out of sync. While tech and $SPX are pushing up at their respective highs, the Dow and transports just don't seem to have what it takes. I have seen times when transports lagged and the markets ignored this and roared ahead, but I can't recall a time when the transports and the Dow lagged so if this isn't corrected soon then I think we could be in trouble. And now $SOX appears to be under pressure. OBV for SMH is showing negative divergence. It's not much of a divergence but any divergence is concerning especially given that the markets can't seem to decide on which direction to take. The RSI for $SOX rose 71.26 last Thursday and so was showing an overbought situation that needs to cool off a bit either through price, time, or both. However, this seems to me to be an inopportune time for a cooling off period or correction in the $SOX index as it means the loss of another engine and how much higher or for much longer can the markets fly if they keep losing engines? It's probably a bit premature to be concerned about the $SOX index, maybe. Regardless, this needs to be watched closely in the next couple of days to make sure the recent action is merely a pause rather than the beginnings of a decline of one degree or another.
Be careful and stay on your toes until we clear this rectangular resistance zone. GL
What do you think of the action the last two days? Yesterday sell off recovered quite a bit by the close. The 4 hour candle was a bullish hammer. Today's action confirmed the 4-hour hammer from yesterday. I did took some profits off the table this morning just in case this Ukraine thing blows up.
I do believe we are in a bubble but that doesn't seem to matter to the markets now. No idea when it might matter.