Here I am playing with the $SPX monthly charts, and noting the bottom indicator StochRSI. Both of the major tops were preceded by divergences in this indicator which I have marked with brown arrows at the bottom of the chart. The points in time where this indicator was maxed out against the top value and pulled away I have marked with thick Black lines, see what happened afterwards...The chart at this point looks Bullish actually, no divergences present...I welcome your comments...What seems reasonable to me is that we might see a correction, sufficient to relieve the overbought pressure (which could happen anytime), and then a resumption of the upside...I've been generally skeptical of this rally for a while, but there doesn't seem to be any internal weaknesses or divergence, just some overbought conditions such as is seen in young bull markets...
7 comments:
Hello Mark, as I look at this chart it is one of the scariest chart patterns known out there. It is a Big M pattern from 1996 to 2009 and an up leg of an A pattern that started in march of 09. If this pattern plays out then when the first leg of the A pattern is completed then the markets start the 2nd down leg of the A pattern that should take out the march lows and then some. I have seen these patterns work on smaller time frames and they are ugly to a bull. According to the book these patterns work out about 75% of the time. And with very light volume when the selling hits and everyone running for the exits at the same time will not be pretty. Just my 2 cents worth. Waldo.
Hi Mark, Hi Waldo,
http://blog.afraidtotrade.com/fun-and-profit-with-market-internal-divergences-april-21-update/
Looking at the market internals, they have been pointing down for a while now...
But price is not following yet...
There is a full moon next week.
Cheers
Hi Guys,
It could, of course break down badly, and as you know I've been very skeptical of this rally from the start,
It's just you would think by now we would be seeing some negative divergences, and so far there are none...This is what gives me pause, plus, the recent volume is cranking up again...at tops we should usually see some very low volume days...
Everything is REALLY overbought right now, so a pullback seems certain, what I'm wondering is whether this is a pullback in a bull market wrought by throwing trillions of dollars of borrowed (or stolen) taxpayer money into the financial system..Just a thought..
Mark L.
Mark, according to w.d.gann a time cycle on legs up in the markets of anything is 4 months and a few days and since the feb.5th bottom we still have a ways to go as far as time goes so who knows.
Hi Mark,
I've been hearing a lot of analysts remark about how low the volume has been during the past months of this rally (excluding the past few days), but I just looked at a 5 year monthly chart of the SPY and I see the volume was much lower from the middle of 2005 to the middle of 2007 when the market was also rising. (Unfortunately, my chart won't take me further back than that.)
It makes me wonder if the volume really has been that low for this rally - or is it that the volume has been decreasing?? I'd appreciate your comments on this.
Hi Gail,
I just looked at a chart of SPY volume, and yes, the volume appears lower than from the 2005-2007 period..If you look at the volume for $INDU the volume has now declined to around the same average value as in the 2005-2007 period. I think the discrepancy might be because most volume charts off of ETF's (like SPY) have gained in popularity over time, and will show lower volume as you go farther back, but stats for the Dow Jones Industrials has always been kept and participation in it has remained more constant...For the Dow Jones, I see much less difference in volume between the two time periods...
Regards,
Mark L.
Thanks Mark. That makes sense.
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