All indices have formed stick sandwiches or modifications of them. I am short/intermediate-term bearish and will reflect this sentiment by incorporating my primary swing strategies with the current day trading. Day trading is great and all, but I'm looking to capture larger chunks of the moves. Also, it'll ease up my time to focus on other things. A swing trade can be a simple overnight 2-day hold or a multi-week hold and everything in between.
Charts shown are 9-mo and 5-mo.
The SPX is short-term bearish and intermediate-term neutral as it is with most of the other indices. I'm looking for a 1-day neutral/reactionary move for entry. The RUT continues to lead the way down as I have predicted. It is testing the 100-day MA. The DJIA is testing the lower ascending range as well as the 50-day MA. Finally, the COMP is in a neutral range and threatening the lower boundary. Notice how all the indices are in different stages of the correction?
The transport index is also testing the 100-day MA and is in a neutral range.
Not only are all the indices in different stages, so are the individual sectors.
I like to look at the individual sectors especially during times of consolidation. This is especially helpful if you are inclined to build a both long/short portfolio. Sector analysis helps you separate the strongest and the weakest sectors. After all, not all sectors move in the same way as you will see below.
I'm continuing to look at the 20-day MA for the initial reaction in the SPX. I am also looking to see if it may possibly need the help of the 50-day MA, which will bring the market into a flat, neutral range. The latter is a threat to the rally. So far, I see an orderly pullback and nothing that suggests that we go crashing down.
There are a few things that I need to talk about regarding the individual sectors. The XLB, XLV, XLI, XLU, XLF, and XLE are consolidating nicely, which is expected. However, I am focusing on the XLK, XLP, and XLY. Make note that that these three are forming the apex of their respective wedges. A resolution here may foreshadow what is to come in the next few days/weeks.
The SPX is back within the 990-1012ish neutral range. This is within a larger 980-1040 neutral range. I wouldn't suggest trading the indices in such a tight consolidation zone.
Is it time to short? The easy way to answer this question is to break down the market by individual sectors/industries. I like to use the Select Sector SPDRs (XLV, XLB, XLK, XLP, XLI, XLU, XLY, XLF, XLE).
For the most part, each sector is within a neutral range and/or a rising wedge or channel. The XLF is the only sector that broke through it's lower long-term trend line (out of 9). I do pay attention when 2-3 sectors start breaking down ahead of the market, usually a precursor to a major pullback. For now, however, I don't see a reason to rush on getting short.
No time to write, but here are some charts. I have a wake up at 4:30AM to catch a flight. I usually sleep at around 3AM, so I have to force myself to sleep.
First up are the SPX charts in the following order: 5-day, 10-day, 1-month, 2-year.
I want to note something very important in the 2-year chart and it has to do with the volume pattern. For the first time, the volume is increasing on the up days. If you looked previously, the volume has always risen during the selloffs and declined during the rallies. Next up are the SPDR Select sector ETFs.
