All of the major indices reflect similar conditions. Short term measures of supply and demand have tipped to the bears favor. Hourly charts depict price action falling below their respective 9/20ema, therefore caution is warranted.
As members, you know we use this as a benchmark for early “alerts” to possible trend changes. Now we await a follow through bearish day to confirm. Look to the Fibonacci levels and VBP support zones for correlation of short term targets.
If the trend is about to change, we only anticipate a pullback to the rising moving averages. We use the 9/20ema on the daily time frame as well. If a larger change of sentiment is about to overtake the market, this time frame would fail as well. We do not anticipate a “major” course correction at this time, as the underly optimistic sentiment still permeates the markets, in this most seasonally bullish time of year.
The S&P500 SPDR ETF shows the same scenario unfolding. Here again, look to the Fibonacci and VBP levels for correlation. Anticipate these support levels as short term target zones, until price regains the upper hand.
RSI is dropping through 50. Stochastic, MACD and TICK cumulative agree. Volume is the icing on the cake.
SPY daily is overlaid with targets and reference levels. Keep your context in check as we only anticipate a 1-2% downside move at this time.
We now begin the task of anticipating where the next pivot low will occur in what appears to be a longer term uptrend. Fibonacci levels that align with VBP support are the most logical places.
For the thoughts herein to be negated, price needs to regain recent highs.
You should also watch macro conditions. The dollar, bonds and commodities all play a roll in determining when it will be time to add to our 401(k) positions.
Finally, watch list stocks should be monitored for any weakness. Be sure to check the sectors for confirmation, in addition to market internals before placing any new trades or exiting existing positions.
Happy Tuesday – Vinny
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