The rally has seemed to weaken considerably over the last week, but managed to end the week with a new top. I think that was the top for the foreseeable future and a drop in the coming week is unavoidable as the rally loses it's steam. I've highlighted the most obvious signs pointing to a reversal (notably falling volume, bearish divergence in RSI and MACD and the possible double island top reversal pattern)
I'd agree and add there are some fundamentals supporting the reversal. Some bad news regarding the virus - infections rising in Italy and a new shutdown is being considered. The immunity previously though to be present after having the virus is in question, as there are now cases of people who had recovered from the virus again testing positive, meaning they can be re-infected.
The 800 pound gorilla is, of course, that the economic damage continues to accrue globally, and has not been priced in. Add to that an unrealistic view of the Fed's ability to prop up markets indefinitely. All a recipe for a falling market.
fav789
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I agree that we should be starting the next leg down, but the issue I have with this analysis is that it doesn't hold up on any chart above the 2-hour. The daily (most common) has zero RSI divergence, isn't oversold, and the MACD shows very bullish actually. Still on the daily, the Stochastic shows overbought though and it hasn't been this high since 20 Feb, which is very bearish. The drop in volume is there for sure on any chart.
Weekly is very bullish according to MACD, RSI, and Stochastic.
Monthly, however, is very bearish.
I personally think we are working our way up to 293, the 61.8 Fib retracement level before we see the re-test of the bottom. I really thought it was turning when we were hitting 262 at the end of March, but that clearly was not the case.
snofox
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@fav789, Good points. .618 is def one to keep an eye on. If we had better momentum after pushing through 50MA and 285 resistance I would agree, but I didn't find the last hour on Friday convincing. We should have been flying through when we pushed through, but instead there was pushback from the bears, and we didn't end the day at the top (pretty close though). If we don't gap down on Monday I see 293 as the next big level, with 270, 240 and 210 to watch on the downside. Really though 270 would be the top earlier myself, should have been more patient with my shorts I guess :)
jollybee78
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Your analysis is really great. I like it!
Petrichor_
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I can see the double island top. I can also see that we may be two candles into an evening star, IF Monday is a red candle. This bull trap also appears to be completing a rising wedge, with volume divergence. If Monday closes above 2923 this invalidates the rising wedge, the double island top, the evening star, and we may have to strongly consider closing our puts.
FishyTrades
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@Money2020_ET yep
snofox
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@Money2020_ET, Agreed :)
jryda
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honestly it seems like the fed is painting the most bearish signals the past week for puts to load up and there was more call volume so it might be time for the rug pull i bought puts on Friday for 260p 5/15 was up 17% but then now down 13% after IV crush and that pump at the close, but that last candle had more sell volume there it looks like???
AlphaBotSystem
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Don't disagree with the overall outlook, but currently have a long signal on the NASDAQ. Don't think we will see too much deviation between the major indexes if we head down.
inteist
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@AlphaBotSystem, You have plenty of bull signals on the left that did not work out.
The 800 pound gorilla is, of course, that the economic damage continues to accrue globally, and has not been priced in. Add to that an unrealistic view of the Fed's ability to prop up markets indefinitely. All a recipe for a falling market.