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Friday, May 30, 2014

Daily update 5/30

The resistance areas I showed on the charts last night held the market in check today.  Here is the daily SPX chart.


SPX closed right on the upper trend line.  It still had a blue bar so it closed above the upper Bollinger band and is extended.  Today was a very narrow range bar.  After an extended run that shows a loss of momentum.  Since we are extended and at resistance with a loss of momentum odds are probably rising that a pullback is coming soon.  IWM and IBB were down .49% and .61% respectively.  The COMPX made a hanging man bar and IYT now has a shanghai duo.  We have a number of bearish looking chart patterns going here.  June is one of the worst months statistically.  Hmm.  Here is the weekly SPX chart.


The weekly chart also has a blue bar so it is extended as well as the day.  There was a noticeable drop off in volume on the last two bars.  We broke out of a multi month trading range on that light volume.  Not a lot of conviction there.  Lets have a look at the futures chart.


The main feature on this chart tonight is the - DI line.  It ended the day at 11 which is extremely low.  In my studies I noticed that getting a DI line down to a 13 handle is a good sign of an extended market.  For rallies we watch the -DI line and for sell offs we watch the +DI line.  It seems kind of odd, but it does work pretty well.  The last two times -DI got to a 13 handle were at the March and April highs.  When it turns back up it is usually a sign the rally is over or at least very close to it.  We are 55 points above the 100 SMA now.  That is pretty stretched.

So we are clearly very over bought in the short term.  There are a number of key indexes at potential resistance points with potentially bearish candle patterns.  On top of that we have June coming up which is one of the weaker months for the market.  I don't know who was buying today, but I have to say the odds are pretty high that they could have bought in at a better price next month.  I guess we will see what happens.

The market and sector status pages have been updated.  Have a great weekend.

Bob

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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.