Market Breadth Is A Concern & Risk Is Growing
The Technical Flash Chart Report on S&P 500
US Equities were higher on Monday, but I think are setting up for a sharp pullback based on technical analysis using trends, cycles, momentum, volume, market breadth and key resistance zones.
Take a look at the charts below for a quick flash of my analysis.
Barchart Market Momentum Index
This chart I look at daily. In short if its price is at 101 or higher I expect the broad market to pause or pullback within the next day. It tells me if stocks have moved to far in one direction on a daily basis and if so sellers (big money players) are likely to re-align stocks by taking profits or shorting during these times.
Stocks Trading Above the 50 Day Moving Average
Here we can see that while the SP500 (SPX) (SPY) has been rising over the past 6 months, less stocks are trading above their 50 day moving average. This means a smaller group of stocks is holding the market up and it's just a matter of time before those stocks burn out and roll over also.
Key Sectors That Move & Lead the Market
Technology ETF (XLK), Industrials ETF (XLI), Transports ETF (IYT)
XLK Chart
SPY Swing Trading Analysis - Daily Chart
The SP500 is breaking down from its trend channel and testing a short term resistance trend line. Odds favor sellers should become more active and pull the market down, as they unload any remaining long positions and possibly get short the market. Both of these actions will put pressure on US Stocks.
Big Picture Outlook - Don't Get Me Wrong!
This chart is just to show you what is possible. I am not a perma-bear nor do I want another bear market like this to happen. But knowing what is possible still has to be known. Major market tops are a lengthy process and tends to take several months. If this is the case then it could be a wild and choppy market for the rest of 2013. Do not expect price to just collapse and free fall for 18 months... Dreams like that do not happen. Bear markets must be actively traded as they carry a lot of risk.
The Technical Analyst Conclusion:
This week is do or die for US stocks. We need sellers to step in here and pull stocks down. With the SP500 trading at resistance, stocks being overbought on a short term basis and the holiday week behind us which typically favors higher prices, it is now time for sellers to become active once again.
Courtesy of Chris Vermeulen, www.GoldAndOilGuy.com