What we have in the indices is intraday down trends going against the daily uptrend and I prefer to have both in alignment for a good uptrend. Even with the strong V shape reversal we saw on Thursday and Friday, it is still a lower high after a lower low. Bulls could do one of two things if they are taking control from here, take out 9/30 high which would make a higher high and give lots of room for higher low or put in a higher swing low above the 10/2 swing point. If bears are still in control they will keep the pattern of lower highs and lows.
Aside from that there isn't much else to say. Just have patience for some better trend alignment in either direction and if we get it stocks will trigger. So let's look at a correlation I think has some learning value.
The blue line is SPY and the chart is XLE. All the bears needed here was slight weakness out of the indices and they used the opportunity to pull this sector down all the way back to break-even on the year. The vertical line is the big picture lower high bears were working off of for this entire move.
This is how trading correlated assets works. Indices provide a benchmark and everything correlated to it makes a move in the same direction but of different size. Sectors are more strongly correlated than stocks. I know most of you all know this but there's always new people coming here and this principle is important to understand. These aren't theoretic correlations either like gold and the dollar, these correlations are built into the instruments.
There are actually a fair number of good looking daily charts. Some still need better intraday trends but so does the index. These daily charts look good and if bulls get the upper hand I think stocks in here will be triggering moves.
Bottom line is the indices still need more work and until intraday lower highs and lows stop the bears have the upper hand. But it's a bull market and longer term trends are in place so I'm prepared with a watch list of good daily charts. Manage your risk individually in each position you take, correlations don't manage risk they increase probabilities and market awareness. Thanks for reading
Trade well,
-Michael
