Trade What Is, Not What Should Be

The SPX bounced off its 200DEMA inflection point and made a 8-day Fib day count run to test the highs of its 2015 relatively narrow trading range and made a 7/20 2132.8 intraday high before closing on 7/23 at 2102.15, or +2.1% YTD.

As of last Fri [7/17] the SPX was +3.3% YTD. However, the QQQ was +10.5% for the same period, but last weeks +5.5% gain represented more than half of the move. And almost half of that was due to Google and APPL, while 60% of the QQQ YTD run was attributable to only 3 companies which are Apple, Google and Amazon, If you figure in the gains of Facebook, Gilead, and Netflix, the 6 companies represent 80% of the QQQ`s +10.5% gain YTD. Not what you would say is a broad technology gain YTD [Mike O`Rourke, CMT]

The SPX also reversed from the 12 MO EMA last week, and as you see on the chart the significant negative 5 RSI momentum divergence continues to extend as the markets approach a significant long term Pi time symmetry zone going into the 1st week of Oct. The SPX leadership has narrowed significantly as the herd chases the fewer key winners, and obviously the risk for market participants couldn’t be much higher as we approach the key time zone.

The Central bank continues to control the markets and BS everyone about potential rate hikes, but of course it is always “data dependent”, blah, blah, blah. Greece is a non-event and remains insolvent regardless of any bailout because it serves to enable creditors so they will continue to get paid until the next time, Do we really care about Greece seeing that 24 US states have a larger nominal GDP than Greece. The bond bubble shows signs of breaking as TLT just closed out of its daily chart trading range, above its H&S neckline, and also above its 200DEMA

The news cycle has been all Greece and China for the last few months and that has given day traders some intraday Volatility Band opportunities, in addition to various inflection point bounces, but aside from that the market is in the usual summer malaise so it is not prudent for traders to force it. “Trade what is, not what you think should be.”

 

Kevin Haggerty