If you haven’t already, go check out the post I made during the week. It lists all kind of indications telling us that the market needs a breather –> S&P 500 Party Coming To An End?
S&P-500:
Starting out the week it was all about the distribution I keep talking about,
and it ended up holding exactly as that much distribution should. We also had a
nice divergence on the daily RSI with an overbought weekly RSI. Looking at next
week, there is still a previous breakout level at $1770 that I will be watching the
reaction to. The weekly RSI is back below the 70 line as well, I wouldn’t be
surprised to see a slow drift up until the FOMC announcement but like I said
watch that $1770. If it holds, watch for a slow drift back near $1800. If we
break below that, next level I’ll be watching to be tested is $1740. This whole
setup is kind of reminding me of last years short term top, just wanted to point that out as well as the
fact that every correction we have had this year has been preceded with
distribution bars.
NASDAQ 100:
The big thing about the NASDAQ I feel you have to be paying attention to is that
weekly RSI. Even with this week’s sell off we are still above 70 after being up
near 80. That is something I will be keeping in mind for all the stock
indices. There is a key level at $3400 originating from the tech bubble so I
will be watching that as well as a small demand zone at $3450. That’s about all
I got for now, the Fed announcement is really what is going to determine things
and that’s including the S&P as well.10 Year Notes:
I am still pretty bearish on bonds/notes and bullish on rates, especially after
last week. The structure just doesn’t get much better than this, a lot of
people will be looking at the weekly thinking ‘head & shoulders’ but the
preceding drop is just too steep in my opinion for that to have any follow
through to the upside. Be that as it may, there is still a key level at 125’0
that needs to be broken before it can head lower, but again I need the
information the Fed is going to give on Wednesday to make any decision here.
Long term though, the structure is definitely bearish.Euro Currency:
Euro is still looking good across time frames. Yet another market that depends
on the Fed’s announcement for the short term but aside from that I am going to
be watching the 1.3700 key level to hold for more upside. If it doesn’t hold
then it probably isn’t ready to head higher yet, but if it does then there could
be a big drop in the dollar (because this would mean high odds of breaking the
big 79.000 level) and a nice rally in the Euro.
Internals:
I included these two in the post I made during the week and they are still
sending the same signals as they were Wednesday. It would be a pretty big deal
if the S&P percent of stocks above 200 SMA broke below the 75% level. You
can see that level held three times this year, and with the divergences that
have been forming all year it has more pressure behind it now that it is falling
which gives it higher probabilities of breaking that level. Look at this chart and you can see what I mean, breaking that
would send the S&P lower for sure. Meaning a real correction. VIX
is telling the same story as it has been, squeeze firing and continuing higher
which is something I love. All I can say is the same thing I have been which is
watch that upper BB. Price should be hugging it while a squeeze is firing
especially a squeeze that was packed this tight, so I’m looking for more upside
on the VIX. I think complacent investors and traders are going to get smacked,
levels of complacency are unbelievable right now.Economic Releases:
Once again, the big deal is FOMC on Wednesday. Taper is the word. Other than
that it is pretty heavy so that is a good thing for market action, especially
while VIX is rising. We have Industrial production, CPI, Housing Starts, FOMC,
Phili Fed Survey, Existing Home Sales, and GDP.
Hope you guys traded well this week. I figured out how to post my pictures
so they don’t open in a new window but still open to full size if you click on
them. Also made a few improvements to my website, if something isn’t showing up
right, let me know in the comments please.
Take care,
-Michael
Take care,
-Michael
