hobo4000

SPY/DIA Volume Divergence

Short
Divergence continues to build between buying volume and valuation in the combined SPY /DIA chart. I believe this indicates buyer fatigue in the sectors that have seen a bull run after the tech selloff. This, along with TNX jumps continuing to drive the IXIC down, could indicate imminent trouble in the general markets. It doesn't seem that the SPY /DIA can keep up enough to counter balance the drops in the IXIC to maintain overall market stability.

If the TNX continues to rise and the IXIC continues to be driven down, I believe the SPY /DIA will eventually break the bullish trend and begin its own pullback, which could cascade into a full market correction or worse.


If the TNX flattens out and stabilizes, I will be looking for the IXIC to double top , failing to break past its last peak, which will indicate that the market is not as strong as it has been. This could likely cause a rush of fear selling, causing a sharp decline, which would cause margin calls, with further downside. The SPY /DIA will most likely be dragged into this fear and downward momentum as they are still trading 17% above their last pre COVID support.

This is further supported by the monthly IXIC indicating it being overbought on RSI and Stoch 14/3/3, along with the February candle forming a shooting star , and March forming a hanging man so far, both indicators of a bearish reversal.


I will be looking to maintain liquidity past the week of 3/15, and planning on shorting the QQQ in the event of a double top as well as buying into UBT in the event of a full market correction or crash.

Comments

btc is up, usually it means risk on. macd rsi bulish, dix in uptrend, vix in downtrend, selloff that happened looks in line with june, sept,nov
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hobo4000 akatsiya
@akatsiya, I have been wondering if next round BTC will be used as a safe haven holding as gold has been used in the past. I agree that the selloff is similar to the past few, however, I think the test will be the 50 day MA, then the last brief resistance at 13600, then the most recent top at 14180. If it breaks up through those, we'll see more bull action until the next top. If it fails any of those levels though I think it will cause a shakeup that may start a correction. Fear drives markets: fear of missing out, and fear of instability. I'll definitely keep an eye on BTC to look for a correlation.
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starsora04 akatsiya
@akatsiya, Tech led the way up from March 2020. Maybe it is leading the way down and then everything else, like DIA and SPY, follows.
+1 Reply
hobo4000 starsora04
@starsora04, I think you have it exactly right. I think there's only so much cycling the market can take before the whole thing starts to sink.
Reply
akatsiya starsora04
@starsora04, it looks much more bearish to me now
+1 Reply
starsora04 akatsiya
@akatsiya, Downtrend and bear market take time, up to a few months to a year. We were spoiled by the Covid crash last year.
+1 Reply
hobo4000 starsora04
@starsora04, that's the reason I've been looking at these charts daily. The last time the valuations were at this level in the market, there was an initial quick (few week) ~30% drop off, with a quick rebound about half way back to peak. After that it took around 7 months to reach the bottom. And I don't want to get caught bag holding, and also want to generate some income with bear put spreads if the market continues to drop so that I can have more liquid to buy with on the way down. The short term is so easy for me to get caught up in, I feel like seeing the macro trends are key though.
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