Markets Looking A Bit Weak

Even the Nasdaq is looking not so hot…

QQQQ 1 yr daily 29 Aug 2017

QQQQ 1 yr daily 29 Aug 2017

Yes, bull markets climb a “wall of worry” and dips are mostly buying opportunities, but this is looking a lot like a “go flat” and leaning toward a top. Not confirmed reversal yet, but I’m mostly in cash now. (I am more trade oriented than slow investments where you wait for a confirmed exit.)

The indicators:

Price bars and the SMA stack have merged. We need a rollover in their order to confirm, but this is “not good”.. There has been zero net gain for 3 months, all the risk with no reward.

Volume has dried up, and down volume (red) is much stronger than up volume (black).

MACD is not only red on top, but dropping below the zero line, not just a trade out but BE out going negative indication.

ADX black line is showing very little strength ( no surprise in a 3 month go flat…) and DMI is red on top, saying be out.

So the hottest US market is at best flat, maybe going for a rollover.

RUT

The Russel is even worse, already mostly in a confirmed rollover. As it reacts first to weakness, it tends to show what is going to happen in the other markets soon.

RUT 1 yr daily 29 Aug 2017

RUT 1 yr daily 29 Aug 2017

Price is well below the SMA stack and returning from below. Once it touches and bounces off to the downside, it is a fully confirmed down market. For now it is most likely a bear market already. Only 2 of the SMA lines have not inverted, and they are close. It would take some sudden strong days to prevent them inverting…

Volatility is way low. That happens at tops.

MACD is strongly and clearly below the zero line, saying “just be out” and it looks like blue/red is merging sideways in a “trend continues” way.

ADX is not yet strong, But the red DMI- line is strong and on top, saying the fast trend has been down and looks to continue.

SPY

SPY vs RUT is looking like a confirmation…

SPY has the SMA stack and price in convergence, but RUT has crossed over to below it and is retuning from below. In bull markets, RUT leads up, in bear markets it leads down, at tops, it inverts from above to below. It is calling this a top.

SPY vs RUT 29 Aug 2017

SPY vs RUT 29 Aug 2017

Volatility low. MACD below zero and red on top. Both saying be out.

ADX still very weak, so long term trend low (3 months flat) but DMI- red is on top and modestly strong. Not good.

All in all, I’d call this an early topping indication. We don’t yet know if it is a Trading Top (so a 10% or so “correction”) or a secular top (year or two drop…). That must wait for the 10 year chart to confirm, or not.

For now, I’m in short term trades only and watch indicators mode. Swing trades as there is not enough trend to trend trade, (Things like MACD crossovers to enter / exit, not trading based on a strong ADX indication and “buying the dips”). As the top is confirmed, I’ll shift to shorting when price returns to the inverted SMA stack from below.

Not in the graphs, Gold is rising, so looks like foreign trades not parking in dollars… that’s only speculation so far, but is is where I’m going to look next for more confirmation (or repudiation).

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in Economics - Trading - and Money and tagged , . Bookmark the permalink.

2 Responses to Markets Looking A Bit Weak

  1. jim2 says:

    They’ve been looking like they should roll over SO LONG … it has to happen at some point.

  2. Larry Ledwick says:

    One thought is that folks could use Houston/Louisiana and Harvey damage as an excuse to retreat a bit without it being blamed on the current administration. We know the insurance companies and lots of business will have to raise capital to recover from this disaster.

    Major disasters also create a huge labor market for lesser skilled workers so might be a net gain on the employment front, as folks head south to pitch in for the recovery.

    They will be working round the clock for a couple years just to repair the critical infrastructure, plus flood controls and improved bridges and levies, not counting cosmetic damages.

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