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Pullback In U.S. Equities Likely

Only 30 minutes to go; SPY, QQQ & especially IWM are trading comfortable higher but I wouldn't be surprised in the least to see a red close today. IWM looks poised for a sharp pullback to at least the 116.60 area. No reason to post a 5-minute chart of QQQ since it has basically gone nowhere while the SPY & IWM have climbed, ignoring the fact that the former leading index has trouble under the hood (as recently pointed out from the weakness in some of the top components of the Nasdaq 100). I would guess that if these pullbacks are going to materialize, they will likely begin to do so heading into the close today or early in the trading session tomorrow.

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Jun 8, 2016 3:42pm|Categories: Equity Market Analysis|Tags: , , , |6 Comments

6 Comments

  1. lee1 June 8, 2016 4:11 pm at 4:11 pm

    I notice this is on a 5 min chart. How reliable do you find 5 min charts to be in calling tops/bottoms? You tend to use 60 min charts a lot so why at times do you use 5 min charts and would a 5 min chart not be more useful for just day trading (intra day trades) as opposed to calling a top or bottom in a stock or the market? Hoping you are right and SPY does pull back now but it just seems awful bullish now.

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  2. lee1 June 8, 2016 4:19 pm at 4:19 pm

    My mistake I see you have a target of about 210 on SPY so this is very short term. I initially thought this was a longer term. It makes sense now your 5 min chart as you were not projecting a longer term low but something that could transpire very soon.

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    • rsotc June 9, 2016 9:13 am at 9:13 am

      @lee1 Yes, the 210.70 target on this 5-minute is a near-term target which I might extend, depending on how the charts develop throughout this week. To your earlier question, using a 5 minute or even a 1 minute chart is simply to hone in on precise entry points for long-side breakouts & short-side breakdowns. For example, I will use the daily & weekly charts to identify trend changes & swing trading opps but then zoom down to the 60 minute or even the 30, 15 or 5 minute charts for timing my entries & exits on those trades.

      Think of it this way, let’s say there was a large Inverse Head & Shoulders bottoming pattern on a stock in which I was planning to go long for a swing trade. If I were to notice a small bullish falling wedge on the intraday charts that, if triggered, would likely cause prices to eventually break above the neckline on the IHS pattern, then I might go long on the falling wedge breakout, even if it occurred before the larger IHS pattern NL.

      Ditto for my exits. If short a swing trade which is approaching one of my targets & I see a bullish falling wedge on the 60 minute charts that looks ready to pop, I might close out my short position early & at the very least, immediately after the wedge pattern breaks out. The shorter the time frame, the more precise the entries & exits on a trade but ONLY if the longer-term charts confirm as I always give a higher weighting to the longer time frames (e.g.- I won’t go long a bullish falling wedge breakout on a 5 minute chart if the stock just broke down below a major support level on the 60 minute or daily time frame).

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      • lee1 June 9, 2016 9:27 am at 9:27 am

        Looks like some kind of pullback today as you projected.

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  3. Art June 9, 2016 9:35 am at 9:35 am

    Nice call Randy. Bought SPY puts yesterday evening just sold for very nice profit. Hit daily goal in one trade. THANKS!!!!

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    • rsotc June 9, 2016 10:36 am at 10:36 am

      Congrats Art. You seem to have a knack for those quick in & out/hit & run type trades. FWIW (and to all), that breakdown on that little 5-minute chart has also caused a bearish crossover on the 60-minute MACD on the SPY, thereby confirming a divergent high in the broad market. That indicates that we’re now most likely looking at a “swing tradable” correction in equities vs. only the quick drop down to the 210.70 level that is listed as my final near-term target on those 5-minute charts.

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