$BPSPX dropped slightly today. If you remember back on about January 18th, I pointed out that $BPSPX had pushed above 75 and that there were some traders who would begin to scale out of long positions as a result. Last week $BPSPX began to waffle and today it dropped just a bit. Wouldn’t seem like much to most people and since I’ve been crying wolf for who knows how long then maybe it doesn’t mean anything, after all. However, I follow this chart of $BPSPX and especially the Sto’s. One rule of this chart is to never add to long positions when the 14,3,3 Sto begins to drop, which it has done, though slightly, for the past two sessions. Both of the Sto’s have had Bearish X’s down through their respective signal lines as momentum is beginning to shift from upside to downside. If this doesn’t reverse, then those Sto’s will lose 80 and by then it will be pretty obvious that the market is topping out.
60min chart of SPY showing how it has managed to avoid a 13/34 Bearish X and sell signal and how it continues to move within the confines of this slightly lower rising price channel. As long as SPY/$SPX can avoid a sell signal in the 60min time frame, then there will be no sell signal in the daily time frame and bulls and longs remain in the driver’s seat.
Chart courtesy of FreeStockCharts.com
Transports rallied nicely today and have negated Friday’s sell signal as the 5EMA crossed back up through the 10EMA even though it wasn’t by much. IMHO, transports are now setting up for either a double top or perhaps a lower high. Time will tell.
Stay on your toes.