Market Update

The market consolidated a little bit today, and the volume is significantly lower than the last week.  Usually pullback on low volume is healthy.  On the SPX weekly chart, all signals are pointing up, especially the volume in the last week when the market broke the resistance at 1044 was noticeably higher than any previous weeks.  Therefore, it is no doubt that the intermediate term trend is up.  With the primary trend keeping in mind, let’s speculate how likely we will see a decent pullback.

On 0.0.3 SPX Intermediate-term Trading Signals, negative divergence on RSI, STO, and MACD has not been resolved yet.  Bearish rising wedge is still there.  However, none of these signals are confirmed and won’t necessarily cause market crash right away.

On the SPX hourly chart, the level at 1038-1040 is a strong support and should hold any recent pullback before making a new high.  If this level is broken this week and the market doesn’t come back, we should look forward to the change of intermediate term trend or at least a larger pullback.  In addition, recent drop seems like a bull flag, and quick upside breakout will lead to resume of rally.  Today’s market breadth look very healthy and there was no panic at all, CPC closed at a very bullish range (refer to 2.8.1 CBOE Options Total Put/Call Ratio).  The end of day pattern seems like accumulation.

SPX weekly SPX hourly

QQQQ is under consolidation and the lower range supported well so far.  Financials are pulling back with decreasing volume, and this seems healthy although daily chart has unresolved negative divergence on MACD.  Before 14.8 support level is broken, no need to worry about the downside risk.  The bounce on US dollar doesn’t last long so the broad market may not be impacted.

XLF daily

Summary: intermediate term trend is up; near term market will likely be bullish.

Market Update

After last Friday’s consolidation, today the market gapped down but closed at a new high with decent volume.  In all timeframes, the trend is still up although negative divergence can be seen on many technical indicators (see 0.0.3 SPX Intermediate-term Trading Signals).  Although the giant rising wedge looks a bit scary, the up trend line has been tested three times and it remains intact.  As mentioned many days ago, the volume between the current level and 1200 is very thin thus the uptrend may not get much resistance.  Note that the SPX weekly chart shows a confirmed header and shoulders pattern.  On the intraday chart, the market gets a little bit overbought and negative divergence on RSI and MACD could cause a pullback in the short term.

SPX hourly

Financials were very bullish today.  XLF may not make a new high very soon because of overhead resistance and negative divergence formed on the chart.  However, the uptrend seems being resumed and the breakout of the consolidation region between 13.7~14.8 could be violent.

XLF hourly

On the other hand, US dollar and crude oil do not look optimistic to me.  If the oil price goes further down and dollar bounces back, the stock market will suffer and the finacials will also pull back significantly.

US dollar futures  Crude oil futures

Summary: intermediate term bullish but be cautious. Could see a pullback in the short term.

Market Update

Today the market pulled back a little bit but the market breadth was not optimistic.  The intermediate term signal on the daily chart (see 0.0.3 SPX Intermediate-term Trading Signals) is still buy, but it’s at the edge of being reversed.  The big pattern looks like a rising wedge while the market always backs off after touching the upper trend line, negative divergence on all indicators has not been corrected yet.  Crude oil is sitting on the intermediate term ascending trend line, the futures index has actually fallen below the short term trend line.  The retreat of oil price is not good for the broad market.  EEM (emerging market index ETF) has broken the intermediate term uptrend as well as the rising wedge.  We’d better to keep an eye and watch if this is an early warning of more severe pullback in US market.

Crude oil daily     Crude oil futures daily EEM daily

In the short term, the intraday chart shows a reversal pattern and the support level holds firmly.  Therefore the market may continue to bounce back up tomorrow, at least it may attempt to fill the gap.  XLF is still range bounding with immediate support at ~14.4, the coming breakout is more likely at the upside.

SPX hourly XLF hourly

Summary: intermediate term uptrend may be challenged; short term bounce back may continue tomorrow.

Market Update

Today is a typical post-MAD (Major Accumulation Day) pattern: the market tried to go higher but couldn’t sustain because of profit-taking, while dip buyers were excited to buy any magnitude of selloff.  Due to the balance of bulls and bears, finally the market didn’t go anywhere.  A doji means future direction is undecided, while the previous direction will likely hold.  The intermediate term trend is still pointing up, however significant negative divergence has appeared on the daily chart on many indicators (refer to 0.0.3 SPX Intermediate-term Trading Signals) and the pattern starting from this March seems like a giant bearish rising wedge.  Technically the overbought condition has not been fully corrected at the market close, the market may pullback further tomorrow morning to reach the support zone at 1015-1018 (which is also 38.2% retracement) then the uptrend may resume.  On SPY 15-min chart, a mini falling wedge has formed with positive divergence on STO and ChiOsc.

SPX hourly  XLF hourly

In term of the market breadth, most signals are still very bullish.  The pullback didn’t even push TRIN above 1, CPC and CPCE are also extremely low.  Sometimes over-bullish put/call ratio is an early sign of deeper pullback, so it’s better to protect long positions carefully.

XLF gapped up and broke out the resistance.  However all gains were given back later.  We should watch carefully how it goes in the coming days.  Technically as long as the support at 13.7 still holds, the uptrend will be intact.

The crude oil is trying again to break the overhead resistance.  It seems there is no reason it cannot succeed, but the bounce off of US dollar (as well as falling gold) may not help this trend.

Crude oil daily

In summary, in the very short term the market may (or may not) pull back further.  In longer time frames, the market is in clearly uptrend.  The basic strategy is still buy dip with protected unless the intermediate trend is confirmed to be reversed (not now).

Market Update

Today the market sold off with moderate volume and made the first significant swing low in the short term.  First of all, the long term trend is pointing up according to EMA13 and EMA34 on SPX weekly, however we don’t know if this long term buy signal is a whipsaw.  After breaking out of the consolidation region at the downside, the intermediate term trend is almost reversed down.  On SPX Intermediate-term Trading Signals, the down trend will be confirmed according to NYSI and MACD should the selloff last for a few more days.  In the short term, the market is a little bit oversold, and negative divergences formed on SPY 15-min chart.  Therefore the market may bounce back up tomorrow or even test back the breakout point at 993.

SPX weekly SPX daily

SPX hourly

Market breadth: on 2.8.0 SPX:CPCE, sharp rising CPCE has broken the descending trend line.  If CPCE continues to rise tomorrow, this may confirm the intermediate term top.  VIX went up 14.92% today and is slightly overbought now (see 2.0.0 Volatility Index Daily).  From the previous pattern, it may correct a bit tomorrow which means a green day of SPX.

The crude oil gapped down and almost closed on the ascending trend line.  Let’s watch and see if it bounces back up which will be bullish to the broad market.  Also keep an eye on gold and see if the uptrend is still intact, and get a clue on how US dollar moves in the near future.

Crude oil daily Gold daily

At the market close, XLF also broke out the support after a wild gap down.  According to the past pattern, it may get much more oversold before making a decent bounce.

XLF hourly

In summary, the market may bounce back a little bit tomorrow however the pullback is not likely completed yet.  Wait for the confirmation of intermediate term sell signal and see if the long term buy signal is a whipsaw.