More Rally Ahead?

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On a short-term basis the market is overbought or very near it. However, my personal feel for things right now is that this rally has further to go. Based off of chart technicals, I think the S&P should test the 1130 level at minimum.

The chart above is from Sentimentrader.com showing that small option traders (DUMB money) are buying as few calls as they have at any other time the last few years other than near the end of the bear market. So they are not bullish for sure. This alone seems to make it a likely case that the market has further upside ahead before pulling back.

Also, I looked at charts of almost every stock in the S&P 500 this past weekend, and I am seeing several attractive bullish patterns, and lots more with strong technical bullish divergence that could still unwind a good bit.

I don't really have any tricks up my sleeve right now to have a great idea of if/when the rally will reverse. As long as the recent S&P low at 1060's holds, then I will assume an intermediate term rally is in effect, and may post a bullish trade if there comes a nice short-term oversold set-up.

More Bearish Divergence on SPX

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The hourly chart of SPY looks to be set-up for another possible bearish divergence on a push to new rally highs. Also, some of the shortest term indicators are a bit overbought, so it seems like we may see a pullback pretty soon.

That being said, if this is still a bull market, then the July bottom should hold, and there may be very little if any pullback from these levels.

Exit GLL Trade Today

Gold is not moving down as fast as it should if a new downtrend has started. And the hourly chart on gold is now coming off a nice bullish divergence. Also, many individual gold stocks look to have completed false breakdowns with nice reversals higher. So let's exit the trade and put this idea on pause.

Trade Action:

Exit the open GLL trade today with a market order. Blog exit price is 41.10.

For now, I'm going to post a limit order for a new SPXU buy.

New Trade:

Place a "day only" limit order to buy SPXU at 31.75.

Pullback Ahead I Think

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There a few reasons to expect a pullback very soon. The hourly chart on the S&P is now overbought with bearish divergence. Any push to new highs will create a nice divergence sell signal on the MACD shown above. If there is a gap up tomorrow, it is probably worth selling into for a short term trade. I will probably post a trade if there are new rally highs tomorrow.

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This chart shows that the time same amount of time has now elapsed on this rally as it took for the preceding decline. And the rally did not completely retrace the move down. This is another reason to still either consider a larger downtrend, or at least expect the market to pullback a bit.

Short Term Overbought, but Possible New Uptrend

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The 60 min chart of SPY and SPX is showing the most overbought levels since the April highs. This is happening well under resistance, however today marked a bullish MACD cross on the daily chart after a strong bullish divergence and many signs of pessimism good enough for a rally. Also the gap at 107.50 on SPY was closed above today. Ideally if the downtrend were to continue I would prefer to see the gap filled and then reverse to close below it.

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The 30 minute chart shows a glaring bearish divergence on the MACD. Also measures of market breadth like TICK, advancing issues, etc are showing divergence on today's new rally highs. All this I take to suggest a pullback will happen soon. However, I don't know how big to expect it to be.

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The daily chart shows the MACD bullish cross here. Bulls have to like the way this looks for a rally. And the price reversal pattern is nice as well

The weekly chart however is not showing a classic candlestick reversal, and the MACD is not even in oversold territory, so I don't know that this decline is over yet.


I may post a short-term bearish trade early next week based on this set-up, but I would be willing to exit on weakness and immediately reverse to a bullish trade if there is not a sharp sell off the suggests we will see new lows.

Exit FXY Trade

Based on the way FXY has traded and the daily technicals, and a short term island top now, I am going to post an exit on the trade.

It looks like stocks are likely to rebound, and I think that FXY will act opposite stocks for the most part.


Trade Action:

Exit the open FXY trade today with a market order. Blog exit is 111.86.