Futures are painting a profitable picture this morning. Members in the trading room that held the 214.50 WK4P will wake up to greater than 150% profit. Congratulations.
SPY is still inside this narrow bearish flag pattern, part of a much larger consolidation zone above 211.24. The latter is delineated with a horizontal line which depicts the pivot high from the first week of June, followed by the pivot lows of September and October. With the 50ma acting as resistance and the large volume by price bands (VBP) in the same area, its beginning to feel top heavy.
RSI and MACD show lack of momentum, illustrated in their sideways action.
The XLP XLY ratio lends credence to a bearish bias at the present time. As this line moves higher, the relationship between staples and discretionary leans to weakness in equities. Similarities with late December when the US dollar peaked above 100, continue to support this conclusion.
Short term, SPY Renko shows red bricks, as we drop below a previous pivot zone at 214.50. VBP building significantly below 213.50. If you check the block channel you see the same picture.
Blocks below start at 213.90, growing substantially below that level, peaking at 213.40. This tells me to expect back and fill, with a possible target in that lower zone.
Watch for bear flags this morning for continuation to lower levels or failure to break lower as a sign its time to take profits on your puts.
Unless the dollar reverses course in dramatic fashion, we can only conclude that the October breakout will continue higher. After the peak above 99.00 on Tuesday, the greenback appears to be consolidating in a flag pattern once again. If you’re are bullish equities, this relationship must fail.
More watch list candidates fail to breakout. The IBD50 is failing as well, so it looks like we’ll have to wait until after the election after all. We took profits on MOMO. The stock still looks bullish, yet we felt the desire to bank some profits none the less.
Enjoy the day.
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