State of the Market 1/11
Strong week. Continuing our advance higher out of the rising wedge. We had our 1st big sell day in a while on monday. Dropped to bottom TL of rising wedge and held it and had a good strong buy back to close out the day. Trended higher rest of week and now closing at new ATH.
SPY
So now the question is, will we continue this run up, base out and build a new range higher up, letting the 20ma catch up with price to defend again, or see a quick turnaround on this overly bullish scenario with no real deep pb from this uptrend since early November? Lets look for more clues.
QQQ
Qs essentially same case, only just at end of week breaking higher from TL.Nice failed breakdown recovery. What I would like to see here, which we may be headed for from so much strength in this market, is to begin respecting this parallel trend channel.
As there are no more rising wedge TLs to break above.
DIA
Seeing the same in DIA
However may be running into more problems soon enough.
Some major TLs just ahead.
IWM in the same boat as well, with just showing 1st breaks higher and holding it.
IWM
And very interesting to see this breach of a decade long TL to the upside.
So I have taken a lot of reversal trades in my day trading career. Ive seen thousands of setups, how they run, how they fail, and how they get to that parabolic state. I believe this is the point in the market were going parabolic. I dont see signs of failure yet. I see the signs of us beginning a parabolic run higher.
VIX
Vix continues to get tighter and tighter. Respected TL v well this week. I imagine once that is broken, thats when we may see something. For now we may continue seeing it drift lower, testing breakdown levels, breaking them and bought back up again until we see resolution from this move higher were having.
Put/Call Ratio
This is a new chart im adding to the list. There are a few notable things here
1. Similarity to VIX. Day of sell, the ratio started moving towards breaking higher meaning more puts than calls entering market
2. Stepping higher, not seeing the ratio drop to lower numbers, meaning as this market is moving higher, the calls are not outweighing the puts as much as they have previously.
3. Divergence
Market headed higher, but option bets are not following this borderline parabolic move higher. So either the ratio 'catches up' to the market, or the market 'catches up' to the bets the traders are actually making, or in this case, the lack of bets. This will be an interesting one to monitor.
FNGS / SPY
A VERY nice breakout forming here in FNGS. Might finally mean we see the FANGMAN wake up and make some strong moves to catch up with rest of the market.
MGC MEGA CAP
MGC is basically another FNGS watching biggest companies in the world + a few more (BRKB JNJ V). Seeing that break to the upside to close out the week.
XLK
Tech sector saw a nice pullback to retest bo levels and turned higher.
SMH
Semis continuing there breakout higher.
IYZ
Telecommunications turning up, looking to get out of this year long range high.
XLF
Financial sector continuing its break higher into levels not broke through since the crisis in 08. This may be the one to watch for judging when this market may be ready for a turn.
My problem here is how quickly we are reaching these levels in an already over extended market. Anything can happen, but I do know it needs a healthy pullback to gain some power before a strong potential move to get through and hold through.
KRE KRE/SPY
Regional banks also seeing good breaks here.
KBE
SPYder Banks also reaching significant TL resistance.
XLE
Energy seeing a very strong turn around here with huge volume pick up. Looking great for more upside.
I know looking at individual stocks, you see Solar has been a big runner lately, but I looked at the ETF holdings for XLE, and its biggest 2, accounting for 45% of the whole portfolio are XOM and CVX. So its not just solar causing this. There may be a big shift coming back to the old big oil names.
We are really looking at a serious potential turn here in Energy. Comparing to indices and SMH, the markets leading sector, were starting to show signs of out performing all. Talking about a half decade long trend change.
XLY
Big break in consumers higher out of wedge that held with above avg volume.
XLP
Staples still not able to get out and move higher yet. We have a serious big increase in volume here, seems like only way to go is up.
XLI
Industrials with an excellent failed break lower, ripped back up for breakout. Cant quite get out of ATH yet. Been watching this sector, nothing seems to be making any real large moves yet.
Its relative strength to SPY is actually dropping looking like a breakdown. It cant quite keep up with the rest of the market.
XRT
Retail continues to be super strong. Now might be time to be a bit cautious.
We are hitting our head on 2 TLs here, might be time for the overextended move to see some pull in.
Relative to semis, just cant quite seem to break and start outperforming again just yet.
XLB
Another familiar TL tap. Seeing some pullback to end the week. Had a really nice breakout, some names were popping. Lithium very parabolic.
XLV
Healthcare with a lot going on here. Very nice triangle break, once again into a bigger upper TL
Relative to SPY, seeing some good upside, now into that TL breakout after retest major S levels. Should be some interesting action to come.
IHI medical devices also getting parabolic away from big in play TL.
XLRE
Real estate getting ugly. Choppy action, in between a lot of S/R. Not much to tell here other than relative weakness.
IYR another real estate ETF. Seeing some huge volume increase on this failed breakdown. May be a sign of recovery.
EEM KWEB FXI Emerging Markets / China
Emerging market and China continue to be super strong, continuing breakouts, not quite reaching parabolic yet it seems. Seems like more gas in it to go.
Euro Finance seems to be joining the party. Nice breakouts here.
CURRENCY
USD is seeing strength come in. Euro is weakening, yen strengthening.
GOLD SILVER
The big metals also getting tight/failing. Telling me might not be time yet for that drop again.
IEF TLT TNX BONDS INTEREST RATES DOLLAR
I thought that the Monday sell was going to be ugly because of these charts. These bond etfs were starting to peek higher and breakout and I thought that might be the cue we needed to reset. Then they collapsed after we recovered.
10yr and the dollar a bit late to this. As were interest rates. In middle of the week, started failing/recovering.
Lots and lots of sectors seeing very strong moves higher, now reaching upper channel/wedge TLs and seeing some stalling action.
While the market showing signs of tons of strength. Must also consider that a lot of these names can also turn and become failed breakouts. We may be showing clear signs of strength and strong trends, but too fast too quickly can be a real issue. We need some time to cool off and reset before really deciding whether this is true strength in this market, or just a euphoric parabolic move.
You see it happen all the time on penny stocks. The stock looks the strongest with the most volume, usually right at the top, before it all comes crashing back, reverting to the mean. We are not getting mean reversion moves in this market for months. The question is.. Who is left to buy up here?
I will be ready for both sides this coming week. No reason to stop playing bull side and buying everything, as long as markets are continuing to see strength. Theres no sense in trying to treat each big sell day as 'the top sell' day. As long as we keep buying these dips, no reason not to think that the sell days will get bought up again. But I am on watch. Were even more over extended technically than we were last week. I dont think were quite seeing this blow off top quite yet, but we are certainly getting close. Financials breaking that decade long ATH, getting parabolic into it, possibly soon through it, could be a big profit taking starter that will send sell waves throughout the market. We will have to wait and see. Until we see that big sell day, that follows through the next day, the long is on and ill keep buying.
Breaking out
FNGS / SPY
IYZ
XLE
XLV
XLB
CHINA
EEM
Banks
XLF
Following breakout trending higher
SMH
XLK
XLF
XLY
EEM
CHINA
At potential failing/overextended points
XLF/KRE/KBE
XLE/(SPY/QQQ)
XRT
XLV
XLRE
Failing breakout
XLI??
Bonds
Interest rate.
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