Wednesday, September 4, 2013

Mixed Currents In Stocks 9-4-13

SPY MACD bullish divergence
Click on Chart to Enlarge

This chart shows a striking bullish divergence on the MACD in SPY.  So from this time frame it would be sensible to go long here with a stop below the 8/28/13 low and a target of the August high.

Click on Chart to Enlarge

The 15 min time frame is not showing any bearish divergence yet which suggests that price will move at least slightly higher before possibly continuing a larger time frame down trend.

The CBOE total put/call ratio today came in at 0.77 which is rather low.  The ISE call/put ratio came in very high, and the equity put/call came in at 0.54 2 days in a row which is on the low side.  All these reading could be interpreted as persistent complacency in the options market despite just a 2 day rally in stocks.  Also volume came in lower today compared to yesterday which means that the add on to yesterday's strength was on waning activity.  All these could be signs of a probable corrective rally which could be a shorting opportunity.  But price action holds the final answer.

In a case like these if looking to short then I would look for a bearish divergence pattern to develop on the 15 min technicals at a bear minimum before taking any sell signals to short.  Given the indicator set-up I think a 30 min chart may even need to develop some divergence before this attempt stalls out.

Situations like this can be tricky because there is no clear market trend and different time frames are mixed on the signals and set-ups they are giving us.  So there is no necessity to trade if it is not obvious what to do given one's method.


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