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60-minute Charts Indicate Likely Correction in Equities

The breakdown on the 5-minute charts were the catalyst needed to cause a bearish crossover on the 60-minute MACD, thereby 'confirming' the negative divergence that had been forming. This opens the door to a substantial, tradable correction vs. just a quick pullback.

SPY 60-minute June 9th

SPY 60-minute June 9th

The SPY (or any of the broad market tracking ETFs) is not currently an official trade ideas although I do believe the broad markets, especially the small caps (IWM, TNA, etc..) still offer an objective short entry with a stop above the recent highs. A more aggressive stop on SPY could also be set on a move back above 212  (or 118.20 on IWM), for those preferring to use tight stops. The levels on this 60-minute SPY chart are just rough support levels although I will try to follow up with some firm downside targets for the major stock indices.

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Jun 9, 2016 10:52am|Categories: Equity Market Analysis|Tags: , , , |7 Comments

7 Comments

  1. TXUTrader June 9, 2016 10:58 am at 10:58 am

    Good analysis. At 11am feels like QQQ’s is at an important juncture. We’re above daily VWAP, which shows some strength (correction of time vs price), but we’re just below 5 day moving average which is flat to turning negative. Bears need a lower close for the week, will it get started today?

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  2. jupiter June 9, 2016 11:40 am at 11:40 am

    How about going long SDS on the 60 min. with a stop below 17.62? Target to 18.51 -16.61?

    Thoughts? Thank you.

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    • rsotc June 9, 2016 11:51 am at 11:51 am

      Sounds like an objective entry (long SDS here) & well placed stop. However, looks like the first decent R level comes in around 18.25 – 18.30 so if you just looking for a quick trade, maybe T1 around 18.22 or so. 18.36 is the top of that resistance zone (18.25-18.36) so you could also target the top of that zone although that does run the risk of prices reversing at the bottom of the zone. 18.54 & then 18.73 look like the next decent resistance levels/targets (setting any sell limit orders slightly below). The other option is to place a trailing stop & let the position run, as a decent case for a substantial correction can certainly be made right now. G-luck on the trade & FWIW, I prefer a short on the small caps (IWO or IWW/TWM, etc…) over the SPY or QQQ right now.

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  3. rsotc June 9, 2016 11:42 am at 11:42 am

    TXU- Regarding QQQ, keep in mind that it has been unusually weak or more accurately, under-performing the other US indices such SPY, IWM, MDY, etc.. for the last two weeks. That was/is a red flag for the US equity markets IMO but as you said, we are at an important technical juncture & haven’t (yet) broken down. Thanks for pointing out those levels. I’m also watching for a possible break below the 109.40 support level & more importantly, the 108.30ish level. I also think that IF the markets are headed lower from here, IWM looks to have the most meat on the bone for a diversified index short. IWO (Russell 2k Growth Index) is another option that might even have a little more meat. First swing target 137.50 area, current price 141.20 (about a 2.6% drop) with a 2nd swing target around 133.60 (5.4%).

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  4. TXUTrader June 9, 2016 12:31 pm at 12:31 pm

    Randy,

    You are spot on regarding the need to get below 109.40 (Ideally before the end of the week) and hopefully 108.30 soon after. Late this morning it like another low open and steady climb throughout the day. I think getting below the VWAP was key and now we just need to stay below.

    Best to all.

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  5. TXUTrader June 9, 2016 4:33 pm at 4:33 pm

    ‘If they don’t scare you out, they’ll wear you out.’

    Another day that was tough to be a bear. SPY closed above it’s VWAP and 5 day MA.
    The QQQ’s finished at it’s 5 day MA. Semi’s remain strong and biotechs are not. IWM had a down day, but it looked more like healthy distribution after a big run than a breakdown.

    Tomorrow is setting up to be a big day. SPY’s all time high weekly closes were 212.99 on May 22, 2015 and 212.48 on July 17, 2015. Today it closed at at 212.08.
    The Bulls would love a break thu tomorrow. The bears really need it to establish a ‘lower low’ below 211.19, while closing below 211.5 with conviction.

    The rally to-date has been on very low volume. The SPX is within 1% of its all time high of 2,133. I’m beginning to think that there will be a rush above 2,133 that will:
    (1) Get a last tranche of shorts to cover
    (2) Get some new longs that believe that we will rally to 2,300+.
    Then the bottom gets taking out, inflicting the most pain. We’ll see.

    One thing that I’m surprised that we’re not hearing more about is pressure on the Fed to raise rates to stay ahead of inflation. We know housing and healthcare costs have been increasing, but now commodities are racing higher. Not just gold, but wheat, corn, coffee, etc. How can Fed justify no rate increase if this continues?

    Good luck to all.

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  6. GetItRiight June 9, 2016 4:49 pm at 4:49 pm

    I agree with you TXUTrader about a run past the ATH at 2130, to get a short covering run plus an influx of new longs that think all is clear now. From Randy’s video about a week ago, the pattern in IWM, I believe, was similar, last year. ATH, then break down of the bearish rising wedge, but with a shallow pullback, followed by a rising price channel to a new ATH, and then the rug pull. I imagine the same scenario will take place this year.

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