Ahhh, the market has been anything but overwhelmingly strong this week. We’ve generally drifted up but have experienced significant afternoon selling two days in a row now. If you’re not watching the intraday action, then you’re not seeing this late day dump and the masking of potential underlying weakness.
I can’t guarantee the market will sell-off over the remainder of the week, but it feels that way. Of course, news and trader mood can change everything and we could just as easily continue up. In other words, I don’t know. However, I don’t like the SPX chart right now and I don’t like the last 2 days of afternoon profit taking.
A look closer..
On the SPX daily chart there are a few warning signs that I’ll be keeping an eye on:
- The bearish candles. The last two days printed a shooting star and an evening star. It doesn’t confirm a reversal, but independently, those are bearish indicators and could mark a possible reversal.
- SMA10 magnet – Generally speaking, the SPX is attracted to SMA10 and when the gap between current price and SMA10 is large, we should expect the price to consolidate or reverse down, in the near term, to close that large gap. The gap is starting to close.
- MACD Histogram finally turned south today.
In summary, the market feels heavy. It needs to get down to SMA10 or SMA10 needs to catch up.. Either way, I don’t expect much move to the upside in the market. However, there will continue to be great intraday opportunities if you’re able to participate.
If you’re a swing trader and have limited visibility to intraday moves, you might want to consider staying heavy cash until the market moves again. Another approach I take when the market looks heavy is to find stocks that have pulled back to support levels. These are more likely to be swingable long if the market recovers or continues the move up. However, having said that – this is a tough week to add to swings. As we speak, I’m over 90% cash and ready for another day of scalping 🙂
See you in the boom factory!