I was not going to update because the market is not doing anything we have not already covered (it is again breaking above the equiv. of SPX 2815). But a subscriber requests an update as he does not trust the rally, coming on trade optimism as it is and amid “hidden bearish divergence” on weekly charts. So ever the obliging sort, I’ll weigh in, although I don’t know that I have much to add to what we already know.
I tend to tune out headlines as you know but he has piqued my interest with the bearish divergence. First here is a link to an MSM article lathering up the trade stuff. We talked a lot about the economy data in the previous update and the questions are whether the negative data were real and if so, whether trade optimism can mend it. Again, I am tuning it way down and following the markets at this time.
Now let’s look at a couple of charts and see what we can find out. There are many ways of using TA and maybe some TAs using methods I either do not use (I do subscribe to the ‘keep it simple stupid’ school, after all) or do not understand see actual hidden bearish divergence. But to me SPX weekly looks like a chart that would be concerning the bears more than the bulls. I don’t personally want it to be that way but that is how I see it (right or wrong) and how I am positioned.
The negatives I see are a slight divergence by MACD and RSI with the former triggered down. Also, there are gaps aplenty down below. Add to this the high risk positions of the yield curve, VIX, etc. and there are reasons for concern. But there always are in one form or another.
Now for the positives…
- The market’s very long-term trends are up.
- The intermediate trend (from December) is up as obviously, is the short-term trend.
- And now with a rise above 2815 SPX threatens to take out the downtrend in the time frame between very long-term and intermediate.
- Also as we noted weeks ago, SPX crossed the weekly EMA 20 & 50 back upward (green) after crossing them down in October. The first thing was a bear signal, which we respected greatly. So its opposite? Are we supposed to ignore it now?
Here is the daily chart of leadership items. SOX/NDX and NDX/SPX look pretty healthy and LRCX/SOX has held serve. The only dumpy looking chart is AMAT vs. the broad Semi sector and that could very well be for reasons discrete to AMAT. The Medical Device robot keeps on climbing.
I am just one lowly participant, just like you. I am going to be right and I am going to be wrong. But my job is to report to you what I see, right or wrong and not to see things that either are not there (yet) or that I don’t know how to see. Believe me, you want me to be consistent, not going free style and thinking too much or trying to find indicators beyond my usual scope to try to create outcomes.
So what I see above is a high risk market on the verge of taking the next step to a top-test, as we laid out in the event that SPX 2815 would be taken out. The market could take a reversal and 2815 failure right after this update to let the bulls suck on over the weekend. But as of now that is not what is happening.
Finally, a top-test could end in failure (by definition) and that is why we are taking things in chunks and not making grand pronouncements at this time. But one thing we know is that bulls currently have the ball, and that means something.
I’ll look forward to a more comprehensive review this weekend.