Last weekend I took off and keeping this short because there really isn’t anything new to say, but here we go. The theme is sell rallies. Since the market has not been able to break we should all be open to the possibility of improvements underneath the surface, especially since we are entering a seasonly favorable period. With that said, the preponderance of evidence continues to point to the downside.
Breadth: Just showing a few below which all continue to point to a market deteriorating under the surface. Until they improve no reason to think rallies won’t be given back.
SPX 20-day highs:
SPX stocks above 20-day MA:
QQQ stocks above 20-day MA:
Weekly Bearish MACD Crosses: For weeks I have been displaying how each major index one by one is getting a bearish MACD cross. The only one that hadn’t succumbed as of last week was the QQQ’s. Unless there is a meaningful rally next week it looks like the QQQ’s will join in the fun.
Open Interest: As a reminder I have been tracking the Wednesday SPY expiration pinning since it’s first expiration began and started tracking Friday’s 3 weeks ago. Wednesday is now 7 for 7 and Friday 1 for 3.
It is unusual for Friday’s not to pin, especially twice in a row. Also notable, for several weeks the open interest for both Wednesday and Friday continues to have a lot of put support and very little call resistance. Normally that is bullish allowing free room for SPY to rally, but the opportunity has not been taken. In fact, each time SPY closes very close to, at, or even under high strike puts. Rationally speaking, this should support the thesis that the market is weakening.
SPY-W: Nothing to say here. The line in the sand is the same line from a technical standpoint, 212.
SPY-F: Same as above.
One thing to note. This is the first time in weeks that there isn’t tons of puts at several strikes. It could be meaningless, but perhaps if 212 does break there is less incentive from put sellers to keep it propped up.
In sum, the evidence continues to point to a market that is weakening. With buyers continually stepping up to the plate on each threat of a range break, one must be open minded that a breakdown may continue to take longer with more rallies ahead. With that said, until something changes rallies should continue to be sold.
This post is just a tiny taste of all that I offer in my premium service which includes a more comprehensive weekend post. Furthermore, and more relevant to trading, I provide tons of analysis of the market intra-day which includes real time trade alerts. See a sample of just the weekend post here, which gives you a taste of some of the stocks I look at and discuss throughout the week.