If you look at the charts of just the Nasdaq and S&P, you probably wouldn’t be too worried about the overall market as both continue to ride their nine day EMAs higher. If you look closer, however, you can see some divergences with price and moneystream that is a bit worrisome. If the nine day EMA does break at some point this week (it’s held the ENTIRE YEAR so far for the Nasdaq), I think there is a very good chance of seeing a sharp, quick move lower of 2-4%. Hopefully, the market could right itself from there but it is probably not something you want to sit through if you have a lot of long positions.

On the other hand, if you look at the chart of the Russell 2000, you probably would be worried. This chart has been lagging for about a month now, both in not being able to challenge 2011 highs like the Nasdaq and S&P did and also moving sideways while the other two indices ground their way higher.

Breath has deteriorated as well over the past few weeks and my breadth indicator is as close as you can be to being on a sell as you can be. If we see anymore selling early next week, it will turn to a sell. What we need to see based on this chart is for the bulls to step back up and show some strength soon. They (the bulls) have been weakening for a week or two now and although we haven’t seen a ton of heavy selling, we’ve seen virtually no heavy buying and that’s the problem.

In terms of setups, this was not a great weekend of scans as I went through my charts. There are still some out there, but the number and quality of setups is certainly not what it was in January. Perhaps that’s telling us something as well. There are a few really, really, really thin names out there that look decent like SVN, BIOS, KH, and STV, but when a $4 stock averages less than 100K volume a day, it is certainly not one that has “buy” written all over it. I am not opposed to entering long positions here even with the market being “iffy”, but just be aware that it is more risky here.

Recommended Posts


Understanding Momentum Measurement with the Stochastic Oscillator

In the world of trading, the stochastic oscillator stands as a vital tool for assessing the momentum behind price movements. Momentum, essentially the rate of acceleration in price movement, forms the cornerstone of this indicator’s utility. The core idea underpinning the stochastic indicator revolves around the belief that an instrument’s price momentum often shifts before the actual direction of the instrument changes. Consequently, this indicator proves invaluable in predicting trend reversals with precision. Utilizing the Stochastic Oscillator for Traders of All Levels Whether you’re an experienced trader or someone new to the world of technical analysis, the stochastic oscillator can become a valuable asset in your trading toolkit. When coupled with other technical analysis tools like moving averages, trendlines, and support and resistance levels, the stochastic oscillator enhances trading accuracy and assists in identifying opportune entry and exit points. The Stochastic Calculation Demystified The calculation process of the stochastic indicator hinges on analyzing a price range over a specified time period or a series of price candles, with the typical settings involving a 14-period/price candle configuration. It compares the highest […]


Trading Charts with the MACD Indicator

Trading is a thrilling activity that can lead to financial independence if done correctly. As a trader, the use of charts and indicators is essential in making informed decisions. One such indicator is the Moving Average Convergence Divergence (MACD) which is a popular tool among traders. In this article, we will dive into how you can use MACD to boost your trading strategy and achieve financial success. MACD is a trend-following indicator that uses moving averages to identify changes in the trend direction. The indicator is made up of two lines, the MACD line and the signal line, both of which are derived from moving averages. The MACD line is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA, while the signal line is a 9-period EMA of the MACD line. One of the primary uses of MACD is to identify trend reversals. When the MACD line crosses above the signal line, it is a bullish signal indicating that the trend is likely to shift to an upward direction. On the other hand, when the MACD […]