Stock market performance is currently under scrutiny and poised to open slightly lower Thursday after European banks and other equity markets react to Wednesday’s Federal Reserve interest rate decision.
Summary
The S&P 500 printed a bearish engulfing candle, closing down (-0.75%). If this double top were to confirm over the next few days, the gains since the December low would amount to nearly 26%. (2346.58 > 2954.13 = 25.89%)
The trend is still intact, so we will need anohter method to monitor broad measures of stock market performance. More stocks, more data points.
S&P 1500 Composite Performance
The S&P 1500 composite can help us in this respect. If we add a calculation, where we compare the number of advancing and declining stocks, then perform a percentage comparison, we can measure changes in character. Stockcharts helps us do this graphically. A change in color is what we are looking for. This will be our alert mechanism.
Note the green line in the upper panel. This line is charging higher, with no changes like the two occasions in March. Therefore, we are still in a bullish trend. Confirmation can be seen in the histogram in the middle panel. A shorter histogram bar or one that closes below zero will be needed to change our short term bias. A change like October would be obvious, well in advance of a major decline.
Note the 20d is just below price action in both charts. The trend is still intact, so we want to look at another method of observing changes in character that also eliminate the “noise.”
Renko Chart – Stock Market Performace While Eliminating the Noise
Renko charts will help us reduce the noise created by day to day “opinions” and “financial media” spin. These charts are based on bricks with a fixed value that filters out smaller price movements. This is because there is one data point per time period (day/week/etc.).
Renko charts ignore the time aspect and only focus on price changes. In this case, we set price change to the Average True Range (ATR).
SPY – Daily Renko Performance
Renko prints white and red bricks. In order for us to assume a change in trend, we need to see a red brick.
We note the Average True Range or daily change for the SPY is currently (2.11) and starting to turn higher. We would need to see a major change that exceeds this amount to print a red brick. Since we have no red bricks, we
We will monitor these “signals” over the next few days. For now, markets are oscillating between red and green this morning. Stay tuned.
Join us today in the trading room for our LIVESTREAM broadcast during market hours, as we monitor the markets, while considering new positions. Watch, listen and trade from 9:20 AM to 4:15 PM Monday through Friday.
Happy Trading,
Vinny
Want to become a member? Check details here:
.
Disclaimer: Do your Own Research
Our content is intended to be used and must be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional investment advisor in connection with, or independently research and verify, any information that you find on our Website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. Trades and or positions listed and taken from the watchlist are my own and should not be considered “advise” to enter any particular position or asset.
Investment Warnings
We would like to draw your attention to the following important investment warnings. The value of shares and investments and the income derived from them can go down as well as up; Investors may not get back the amount they invested – losing one’s shirt is a real risk; past performance is not a guide to future performance.
Live Sessions
Live broadcasts are educational in their content. Proper risk management is considered on every trade or asset mentioned.
*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities.
As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.
These mentions are stocks that we may or may not decide to trade as outlined in the watchlist. Always use a stop.