After seeing the start of another red day for the US equity markets and for all risk assets for that matter, we are again trying to detach ourselves from the temporary negative emotions like fear and uncertainty that such market movements inevitably provoke and focus on what the charts are telling us.
We have a clear convergence pattern on the 1H SPY chart, where both the RSI oscillator and the Money Flow Index are making higher lows, while the SPY continues to decline.
As you know, we never rely on any single metric for forming our trading strategy and we always perform detailed intermarket analysis in order to spot whether or not there are further confirmations of what we have identified as a potential opportunity. Thus, we are seeing a potential reversal topping patter on the Volatility Index (VIX), which we posted about yesterday. (see the link below).
In addition to that, we have identified a very strong positive convergence between the Dow Jones Transportation Average and the SPY. As students and disciples of the theories and market structure introduced by Charles Dow, we are always on high alert for any differences in the direction of these benchmark indices. Per the original Dow Theory, the Dow Jones Transportation Average should always move in the direction of the broader marker and if it is not doing that, then it is a signal for a potential reversal ahead. It is valid in both BULL and BEAR markets.
So what does the Transportation Average show now? Does it confirm the sharp move lower or is it pointing to a potential reversal ahead?
Well, the DJTA was moving in line with the market selloff up until April 13th, when it started moving higher forming higher highs and higher lows. As you know, since April 13th the SPY has lost almost 10% of its value and everyone is freaking out that further declines are coming ahead. Well, whether such declines are coming or not it's a topic for debate and anyone is allowed to speculate. However, the charts never lie and that is why we always trust them.
Thus, be careful with any short positions at these levels and do not panic sell your long-term holdings as a major rally might be just around the corner!
We have a clear convergence pattern on the 1H SPY chart, where both the RSI oscillator and the Money Flow Index are making higher lows, while the SPY continues to decline.
As you know, we never rely on any single metric for forming our trading strategy and we always perform detailed intermarket analysis in order to spot whether or not there are further confirmations of what we have identified as a potential opportunity. Thus, we are seeing a potential reversal topping patter on the Volatility Index (VIX), which we posted about yesterday. (see the link below).
In addition to that, we have identified a very strong positive convergence between the Dow Jones Transportation Average and the SPY. As students and disciples of the theories and market structure introduced by Charles Dow, we are always on high alert for any differences in the direction of these benchmark indices. Per the original Dow Theory, the Dow Jones Transportation Average should always move in the direction of the broader marker and if it is not doing that, then it is a signal for a potential reversal ahead. It is valid in both BULL and BEAR markets.
So what does the Transportation Average show now? Does it confirm the sharp move lower or is it pointing to a potential reversal ahead?
Well, the DJTA was moving in line with the market selloff up until April 13th, when it started moving higher forming higher highs and higher lows. As you know, since April 13th the SPY has lost almost 10% of its value and everyone is freaking out that further declines are coming ahead. Well, whether such declines are coming or not it's a topic for debate and anyone is allowed to speculate. However, the charts never lie and that is why we always trust them.
Thus, be careful with any short positions at these levels and do not panic sell your long-term holdings as a major rally might be just around the corner!
