Does SPY pullback after 13 days green? Indicators say yes.

It is unusual for 14-day RSI to be this elevated on an index. Note the sharp move down that Stochastic %K (blue line) in the last two pull backs. Both times there was heavy selling, as shown by candle size and high volume. Currently you will note diminishing volume over these past two weeks.

There is one other strong reason for SPY puts that is not shown. Supporting stochastic and RSI is a directional volume reading over 70 (average DX over 50), while it normally stays under 40. This is usually high, and the last time it happened was 31 Dec '20 (DX =66.7). See the daily candle on 4 Jan '21 (purple arrows and text).

Trade active:

Had a very nice day trade yesterday afternoon after posting this chart. I bought weekly 314 puts this morning when SPY was over 315. The rectangles on right need to be "filled in" - Market makers are pushing up SPY while something fishy is happening in the bond market. All the economic data (for U.S.) released today should have pushed yields higher. Instead the opposite is happening. I wonder if the "puppeteers" are raising bond prices on purpose to cash out, knowing that a reversal is coming. SPY dropped from high but held a while over 414.80... feels like pressure is building on a cracked dam.

Comment:

Well that was unexpected. SPY retreated a bit and spent the end of the week moving higher. Funny thing is that many individual stocks were not going up. Perhaps short covering on OPEX day (monthly options expiry). Will be watching the indicators next week.

Comment:

The three candle pattern forming today is quite bearish, especially if we close below Thursday's open. I am still looking for selling to increase, as the final move higher last week can be linked to short covering and op-ex day. Also I am looking at 10 yr yield which, on the daily chart, looks like it could start moving up again.