Pre-holiday trading usually comes on light volume and favors the upside, or so the saying goes.We shall see. Can $SPX make it 8 weekly gains in a row?
$SPX monthly chart now has RSI at 76. You can look at this in one of two ways: This high RSI reading indicates a strong market or this high RSI reading indicates an overbought market. Either way, it's starting to get overbought but in 2007 RSI in monthly time frame went to 79 before there were any signs of trouble in the market.
$SPX weekly chart now has RSI at 76, up close to 3 pts from last week. Readings this high often precede a red candle week. Last week I said that while the RSI on the weekly chart was high I didn't expect a red candle for the week of 11/18 but that a red candle was more likely for the week of 11/25. I'm going with that. As you can see on the chart, once the RSI in the weekly time frame rises above 70 you have to expect some kind of consolidation afterward regardless of whether or not that consolidation materializes or not. I'm not looking for any kind of big drop but just a flatish week with a slightly red close of a couple of points or so.
$SPX daily chart now has RSI at 66 so is not showing overbought. If the RSI in this time frame were at 70, then the probability of a red week for $SPX would be much higher. But there are a negative divergences in the RSI and the CCI. While $SPX has made a new high, we don't have confirmation from either of these. In the way olden days, negative divergences in either of these, or both, used to be a indication that the market was growing tired and was ripe for a pull back, but lately the market just ignores these things and I think that basically that's what's going to happen next. Down a point or two but nothing more. Also, to add to the idea of a flatish week, the Aroon Oscillator pushed back to 100 on Friday. The Aroon Oscillator is pretty good at spotting an overbought market in need of a rest in order to digest gains and I think that's what it's telling us now.
$SPX/SPY 60min chart now has RSI at 68 so this is not showing overbought. It won't take much to push the RSI above 70 and I think we'll see that sometime Monday. Once the RSI in this time frame pushes above 70 then that's when I think the consolidation will begin and the markets are likely to drift sideways to down to allow the RSI to cycle lower so that it can start up.
$VIX 5EMA is now at 12.75 and has been pretty good at predicting when it's time for a market breather when it hits 12.5. Any push higher on Monday will likely push the 5EMA to 12.5 and would be just more evidence that it's time for a little give back.
Breadth Indicators, with the exception of the Summation Index, $NYSI, are all giving neutral readings and so are not a factor, one way or the other, as of Friday's close.
All IMHO, and there's only a 33% chance that what I think will happen will in fact happen.
GL in the week ahead.
$SPX monthly chart now has RSI at 76. You can look at this in one of two ways: This high RSI reading indicates a strong market or this high RSI reading indicates an overbought market. Either way, it's starting to get overbought but in 2007 RSI in monthly time frame went to 79 before there were any signs of trouble in the market.
$SPX weekly chart now has RSI at 76, up close to 3 pts from last week. Readings this high often precede a red candle week. Last week I said that while the RSI on the weekly chart was high I didn't expect a red candle for the week of 11/18 but that a red candle was more likely for the week of 11/25. I'm going with that. As you can see on the chart, once the RSI in the weekly time frame rises above 70 you have to expect some kind of consolidation afterward regardless of whether or not that consolidation materializes or not. I'm not looking for any kind of big drop but just a flatish week with a slightly red close of a couple of points or so.
$SPX daily chart now has RSI at 66 so is not showing overbought. If the RSI in this time frame were at 70, then the probability of a red week for $SPX would be much higher. But there are a negative divergences in the RSI and the CCI. While $SPX has made a new high, we don't have confirmation from either of these. In the way olden days, negative divergences in either of these, or both, used to be a indication that the market was growing tired and was ripe for a pull back, but lately the market just ignores these things and I think that basically that's what's going to happen next. Down a point or two but nothing more. Also, to add to the idea of a flatish week, the Aroon Oscillator pushed back to 100 on Friday. The Aroon Oscillator is pretty good at spotting an overbought market in need of a rest in order to digest gains and I think that's what it's telling us now.
$SPX/SPY 60min chart now has RSI at 68 so this is not showing overbought. It won't take much to push the RSI above 70 and I think we'll see that sometime Monday. Once the RSI in this time frame pushes above 70 then that's when I think the consolidation will begin and the markets are likely to drift sideways to down to allow the RSI to cycle lower so that it can start up.
$VIX 5EMA is now at 12.75 and has been pretty good at predicting when it's time for a market breather when it hits 12.5. Any push higher on Monday will likely push the 5EMA to 12.5 and would be just more evidence that it's time for a little give back.
Breadth Indicators, with the exception of the Summation Index, $NYSI, are all giving neutral readings and so are not a factor, one way or the other, as of Friday's close.
All IMHO, and there's only a 33% chance that what I think will happen will in fact happen.
GL in the week ahead.