Here’s the way I see it. We’re stuck in a range going back to the middle of May. Top of the range is around 1335 and the bottom of the range is 1266. The highest close in this range was 1332.42 from May 29th, and the lowest close, so far, was 1278.04 from June 1st. Since June 1st, $SPX pushed to a closing high of 1325.66 and since then put in a closing low of 1308.93 on Monday. So all of this is what we know, but what we don’t know is where we go from here. I don’t think we’re going to have to wait too much longer to find out.
What we need to find out is whether or not $SPX is capable of putting in a new closing high or whether it is going to put in a new closing low. If $SPX should push up to the 1335 area, which I showed on yesterday’s chart, and, more importantly, close above 1332.42 then this will show that there are enough buyers around to fuel some more topside action. If, on the other hand, $SPX should drop to the 1308 area and close below 1308.93, then we will know to expect more closing lows. Since $SPX has dropped down to the 1314 area, then one has to expect that a close below 1308 is coming soon to a market near you. The only thing that I see that might stall this is that the P/C Ratio closed at 1.28 today. This indicates that traders have moved to one side of the boat which could lead to a short squeeze. Maybe.
Well, I’m glad I unloaded TQQQ but I am still holding TNA. I could be forced to sell tomorrow and, in fact, I expect that to happen. The 60min chart of IWM shows why.
One of the cardinal rules of the 60min trading strategy is that when you have a break of a rising trend line and a bearish X of the 13/34 EMA’s then it means it’s time to sell. I didn’t do that today because the truth is I was preoccupied at the time and by the time I realized what was going on it was too late. Might as well wait until tomorrow and see if they can rally the markets at the open, though I have no idea if that will happen. Most likely I will sell sometime during tomorrow’s session.
$NYSI is now 1-2 days away from pushing above the 20MA, which, regardless of everything else, would have to be seen as bullish going forward, though not immediately. The DI lines on the chart I use won’t have a bullish cross for maybe another week or two and anything can happen between now and then. I am watching this closely because this means that, whether I believe it or not, weakness is being replaced by strength in the market. $NYSI can be very early. It gave a sell signal in February while the market didn’t top until nearly two months later, but if it doesn’t reverse course soon, then longs may finally get a break.