Category Archives: Technical View

Posts regarding technical analysis of financial assets and indices.

Sidewinder

June has largely been a month of consolidation for the S&P 500. Despite the fact that the index hit multiple new highs this month, we’re finishing the month nearly right back where we started. Having entered the summer with strength, the market is flashing signs now that consolidation might be in order in the near future.

S&P 500, 30 minute bars

For those inclined to buy, the most reliable recent “buy zone” has been in the range illustrated by the bottom two parallel black lines on the 30 minute chart above. The market has found itself moving gradually higher within the range between the two sets of rising black lines since December, and looks set to continue doing so, testing the ranges at intervals as it goes.

S&P 500, daily bars

That tendency is even more apparent on the daily chart. The strength of the rally is fully intact, though mature. Should the S&P begin to consolidate, there is much room to the downside below the 2400 level. Downside support levels below that currently fall at the 200 day moving average at 2300, and the lower end of the broader intermediate term rising range at 2275. Below that, there is further strong support at 2150.

While the market shows all signs of continuing to rally in much the same fashion as it has year to date, its good to keep in mind that seasonal factors often work against it during the summer, and keeping critical support level in mind is always a good idea. Good luck out there.

March Madness

As if on cue, the S&P 500 peaked on March 1st, and spent the entire month stair-stepping downwards gradually, as is most clearly evident on the 30 minute chart below. The mild pullback was certainly overdue, as the torrid rally in February had doubtless gotten ahead of itself.

S&P 500, 30 minute bars

There is no question that political consideration have played a large part along side the economic ones. The pullback coincided with increasing political tribulations for the Trump administration, and growing doubt regarding the likelihood of key pieces of the Trump agenda coming to fruition. So it makes sense that some of the rosy optimism the indices had already priced in would be duly re-priced.

Looked at from the perspective of the daily chart, however, its clear that the March pullback is just that, a relatively small pullback within the context of a much larger and more well established bull market that is still in full swing. The S&P 500 has multiple levels of support below current levels, including 2340 and 2300. However, should the pullback accelerate, the next most viable support falls just above 2200, a significant gap down.

S&P 500, daily bars

However, should we revisit the 2200 level, there would be plenty of technical justification for going long. Strong very long term trend support at these levels make it a high conviction entry point to buy.

While there is a possibility we may simply move higher from these levels, but there is no shortage of risk above 2340; the market is more than fully priced, especially considering slowing corporate top line growth and growing geopolitical tensions. Caution and tight stops are warranted here for long positions, still favored before the beginning of the seasonally weak period beginning May-June.

Best of luck out there.

Higher And Higher

2017 has so far been the year of the Bull. Markets have been going up steadily with the Dow logging 12 straight record closes, and the major indices generally matching that performance. All major trends are and remain up.

That said, the markets are in danger of overheating, and a pullback, while not necessarily imminent, is overdue. The S&P 500 now finds itself snugly at the top of near term and medium term rising ranges, clearly evident on the 30 minute chart below.

S&P 500, 30 minute bars

The light green channel highlights the extent of the rally since the Brexit lows of June 2016, and this channel has dominated the near term market outlook especially since the US election in November. In all probability, the green┬áchannel will continue to act as a rough guide to the market’s trajectory for the duration of the bullish season, which typically ends in May/June.

S&P 500, daily bars

The daily chart provides additional clarity on the strength of the S&P 500 recently. Note though how overbought the index is in the near term. At these levels, the likelihood of a pullback grows dramatically. Its tough to buy here; more favorable opportunities should present themselves presently. A move back down to the 2310 level or below would represent an excellent potential point of entry.

S&P 500, weekly bars

That said, for those with a longer term outlook, the undeniable strength of this market presents opportunities even at these levels. Longer term, the market appears set to move substantially higher, barring the risk of exogenous shocks and major adverse events. The weekly chart above and monthly chart below put the recent rally, and the bull market since March 2009, into more context. As is evident on these long term charts, we remain in the middle of the secular rising range dating back to the 1950s.

S&P 500, monthly bars

While the long term picture is bullish, remember that we have near term overbought conditions predominating in all the major indices. While the outlook remains bullish, we remain optimistic that better entry points should present themselves in the relatively near term.

Good luck out there.

 

Running Hot

Since the election, the US markets have seen considerable appreciation. The S&P 500 in particular has been running hot, advancing more than 200 points between early November and January 26. The rally has attenuated somewhat since the December 13 peak, decelerating notably from the rapid pace of advance immediately after the US election. The post-inauguration bump, while bring the markets to new all time highs, has brought little follow through.

S&P 500, 30 minute bars

On the 30 minute chart, we can see deceleration clearly, as the channel originating Dec 13 shows. Last weeks trade saw a definitive breakdown out of the post-election uptrend channel, confirming the slowdown. The price action to date is indicative of a broad arching top.

S&P 500, daily bars

On the daily chart, we can put the recent price action into more context. While the S&P remains withing the broader upward channel defined by the orange lines, it is sluggishly lingering toward the top of that range. While there are numerous support zones below between the market and the lower orange channel boundary, there is plenty of room for the market to correct before heading higher. While a bullish medium term outlook is favored, the likelihood of mild pullback in the next few weeks to a month has increased over the last week.

2016: A Year In Review

Its been quite a year.

Having started off with one of the steepest declines to begin a year in recent memory, the major indices steadied through the bulk of the year, soldiered through the Brexit referendum, but saved their most surprising move for last. After the US election, the markets defied expectations and staged a huge rally to finish the year, despite tapering off towards the end.

Below are a set of charts showing the full year 2016 for a select set of indicies and asset classes.

S&P 500, daily bars

S&P 500, daily bars

XLF Financial SPDR, daily bars

XLF Financial SPDR, daily bars

GLD Gold SPDR, daily bars

GLD Gold SPDR, daily bars

Happy New Year, Everybody. Best Trading in the New Year!

-Will

 

Quiescence

The entire second half of July 2016 for US equities can be summed up in the title to this post. Its very rare that the market will spend such an extended time locked within a <1 percent range. Its actually historic. The tight range, coming off the Brexit bounce, is most evident on the 30 minute chart below.

S&P 500, 30 minute bars

S&P 500, 30 minute bars

Looking at the daily chart, its easier to see just how narrow and tight the market range is; just look at the congestion! Its pretty remarkable!

S&P 500, daily bars

S&P 500, daily bars

Its not easy to interpret what it means technically for the next few months. However, the sluggishness does suggest that the market has more to digest, and may require deeper consolidation or correction in order to move substantially higher. The technical and fundamental obstacles to a further rally are many and varied, and I won’t go into them all here.

However, one item that we should consider is the fact that August has been the weakest month of the year since the 2008 Financial Crisis, falling an average of 6 percent. While this doesn’t mean we’re on the edge of a precipice, we should be ready for weakness. The late summer doldrums are typically a time to be cautious on equities before the fall buying season heralds the beginning of the strongest six month stretch of the year from November-April.

Whatever the case, traders should be ready for anything, with a break to the upside just a likely as a break to the downside. The only certainty is that this period of quiescence won’t last forever.

Summer Break

With the summer doldrums upon us once again, the markets have made valiant if underwhelming progress toward the May 2015 all time highs. Despite this, the move higher in the past 3 weeks has been considerably less systematic and considerably more erratic that the bulk of the recovery from the February 2016 lows.

Lingering doubts regarding the strength of both US and global growth, weak headline Job creation numbers, the prospect of Fed rate tightening and possible Brexit are all taking their toll. Not surprisingly, equity indices have given back gains of late. The big question on our minds is, do we go lower from here, or does the market reverse and continue up the wall of worry?

With multiple schools of thought on the issue and the charts less compelling than they frequently are, investors are faced with difficult choices when putting new money to work. Below are some charts with analysis to help identify key levels that may help provide clues for how best to position next.

SP-50030minute2016.6.14

S&P 500, 30 minute bars

SP-500daily2016.6.14 SSOhourly2016.6.14 SSO2day2016.6.14 SDS30minute2016.6.14 SDSdaily2016.6.14