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Gold, S&P 500 & VIX updates – Market Wrap

Today was a mixed bag in the markets with the $SPX (S&P 500 Index) closing down slightly on the day with the Nasdaq 100 ($NDX) as the standout performer, largely due to the top-heavy component AAPL (Apple Inc), which closed up 6.5%. The fact that the $NDX-E (equal weighted Nasdaq 100 Index) closed down -0.17% while the $NDX closed up a solid +0.66% highlights the effect that one or a just few of the top weighted components can have on that well watched index. The AAPL boost to the NDX was also evidenced by the fact that only 40 of the 105 stocks in the Nasdaq 100 close the day positive, with 64 declining issues & one stock closing flat.

One thing that stood out to me today, besides the underperformance of the $SPX & $NDX-E relative to the $NDX, is the fact that the $SPX is now poised to confirm that large divergent high that I've been highlighting over the last several weeks. In fact, just one more red close this week is likely to do the trick. It should also be noted that any additional downside in the SPX/SPY will also trigger the recently highlighted pending sell signals on the 60-minute time frame... close, but not there just yet.

$SPX daily July 27th

$SPX daily July 27th

Not coincidentally, the bullish divergence on the $VIX will be confirmed along with the bearish divergence on the $SPX on any more upside (note the 0.00 reading on the MACD histogram indicating a pending bullish crossover on the MACD).

$VIX daily July 27th

$VIX daily July 27th

GLD has yet to give up the 125.47 support level but might offer an objective entry on a tag of this resistance zone which is defined by the July 12th gap. Both gold & the miners still look poised for a multi-month correction & GDX/NUGT may still be added as an official short trade idea soon but I'm still waiting patiently for an idea entry, ditto for any broad market shorts.

GLD daily July 27th

GLD daily July 27th

 

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Jul 27, 2016 5:59pm|Categories: Equity Market Analysis, Gold & Commodities|Tags: , , , , , |7 Comments

7 Comments

  1. lee1 July 27, 2016 6:04 pm at 6:04 pm

    I think s+p is due for a pullback soon but guessing not much lower than 2050, if that, before seeing all time highs again.I think the gold sector will go higher as the s+p pulls back so I am very long the gold sector now..

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  2. upordown July 28, 2016 12:18 am at 12:18 am

    hi randy… when the macd makes a new momentum high above last swing high.. (as in spx current swing 3 compared to swing 2)… does that have any meaning for you?

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    • rsotc July 28, 2016 9:11 am at 9:11 am

      That’s a good point & I would have to say that on balance, that is “less bearish” than if this 3rd consecutive peak in the MACD was below the previous peak as it shows an increase in momentum. So we should probably place that one in the “bullish” column for now.

      In the bearish column, I would point out the previous series of consecutive divergences on that chart from late 2014 to mid- 2015. The second divergent high was higher that the first divergent high & still resulted in a decent correction. i.e. the divergence played out as expected. Also, if we simply ignore the second divergent high in both periods, then the bigger and much more significant development, IMO, is the large divergent high from the initial reaction high on the MACD (and RSI) to the most recent lower high (still pending but close) on both the MACD & RSI. It doesn’t matter that there are 2 or 3 trendlines of various slopes on prices above as negative divergence is simply the fact that the momentum indicators & price oscillators have (or might) made a lower high against prices making higher highs.

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      • TXUTrader July 28, 2016 2:12 pm at 2:12 pm

        Randy,

        I’m looking at chart for QQQ on Daily Basis. The Wilder RSI is now at 70.12. Does this eliminate the divergence? I believe previous high that we were looking at was 70.33 on April 1st.

        Really reels like this has been a correction by time and that the market is preparing for another leg up.

        Thanks and good luck to all.

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        • rsotc July 28, 2016 3:44 pm at 3:44 pm

          TXU- We’ll have to see how we close the day but as of now, the NDX has just slightly taken out those previous highs on the daily time frame indicators on both the MACD & RSI. 60-minute divergences on all US indices still well intact for now.

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      • upordown July 29, 2016 12:23 am at 12:23 am

        ok thanks. that is what i was wondering.. just to clarify.. as long as current momentum is lower than initial momentum cross then the divergence is still valid to trade?

        just an observation.. if the last bullish swing was the stairs up.. then the escalator down will be a wild ride..

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        • rsotc July 29, 2016 10:04 am at 10:04 am

          upordown – Also keep in mind that in analyzing the broad markets, I find it important to look at all of the major diversified indexes to get a feel for stock market as a whole. E.g.- If only one of two indices breakdown below support & the others are still holding above, I will usually hold off on shorting. In this case, if the NDX takes out the divergence on the MACD but the SPX & others are still making divergent highs, that doesn’t eliminate the case for a likely trend reversal although it certainly doesn’t help as it would have been better to see very pronounced divergent highs on all indexes to make a strong case for a swing short trade. One last thing to add is that from my experience, the biggest drops in the market often come after the point the charts indicated it would, sometimes by weeks or even months. Maybe that is a factor of too many shorts seeing the same clearly bearish techincals & shorting too much at the same time (followed by a continued move higher while most of those shorts are squeezed out, thereby clearing the way for a sustained correction).

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