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Weekly Market Analysis - 11 (Members Only)

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The S&P 500 ($SPX) has gained over 80 points since my decidedly-bullish call dating back to May 20th (see Weekly Market Analysis - 10). The purpose of this new article is to update subscribers on the progress achieved by all the major indices, and also to assess the current environment's capacity for continued risk taking.

Indices 

$SPX


Chart 1. The $SPX has reached a Fibonacci resistance cluster ranging between 1952 and 1970.  Expect several days of consolidation in the form of
sideways price action.

$RUT


Chart 2. On the heels of a triple-zigzag correction that ended in mid May, the $RUT embarked on a rally that has so far retraced almost 88.6% of the
March-May decline (wave 4). Expect the index resume higher once the profit taking exhausts,

$NDX


Chart 3. The $NDX is 3.63% away from the bearish Crab's PRZ (3936-3938). Expect the index to resume higher, but not before the profit taking that began
on Tuesday runs its course. 

$COMPQ


Chart 4. The $COMPQ is finally back to its March high and is clearly attempting to break through. Expect the usual profit-taking near a prior reaction
high before the index resume its ascent. 

$SOX


Chart 5. The $SOX index has been on a tear all year and one of the main reasons behind my steadfast bullish stance. Having reached the higher of the
two gray resistance zones,  it would only be normal to expect a multi-day pause. A move above this resistance zone would automatically bring the 
50% retracement zone into the picture.

Risk-On / Risk Off

$QQQ vs. $SPY


Chart 6. This relative-strength ratio is now in the early stages of an uptrend, as forecast several weeks ago. The similarities between the two periods,
May/June 2013 and May/June 2014 are striking. With the $QQQ outperforming the $SPY, and given the fledgling uptrend in the $QQQ/$SPY ratio, 
expect more outperformance in the coming weeks/months.

$RUT vs. $SPX


Chart 7. Back in late may or early June 2013, the 15-ema (short-term trend indicator) crossed over the 50-ma (intermediate trend indicator), thus
signaling the start of a new uptrend. A similar event is occurring now. The $RUT should resume its outperformance relative to the $SPX once this 
profit-taking phase runs its course.

S&P Small vs. Large Caps


Chart 8. S&P Small vs. Large Caps. Essentially the same message conveyed in chart 7.

$JNK vs. $TLT


Chart 9. I also like the 15-ema / 50-ma crossover on this chart of $JNK/$TLT, even though this ratio is currently retesting the north side of the neckline.
Once profit taking is out of the way, I expect risky corporate bonds to resume their outperformance relative to the safe treasury bonds.

$XLU vs. $SPY


Chart 10. Relative to the S&P 500 ($SPY), Utilities (XLU) are trying hard to resist this new trend of underperformance. Having recently broken under the
blue channel, the $XLU/$SPY ratio is currently back-testing the under side of the channel and the now-flat-to-falling 50-ma. This mean reversion move
should soon exhaust.    

$XLY vs. $XLP


Chart 11. Relative to Consumer Staples (the 'musts', $XLP) Consumer Discretionary (the 'wants', $XLY) have risen back from the dead. Compare the
current chart pattern to that of October/November 2013 and the ensuing direction of the major market indices.

Trade well and good luck,

Peter

If you found my analysis thorough and useful, consider subscribing to the TradeWinds service on 61point8.com for an ongoing analysis of the U.S. market indices and a steady flow of trade setups. As always, you will continue to enjoy my free contributions on Twitter and StockTwits by following @PeterGhostine. My StockTwits page is http://stocktwits.com/PeterGhostine.

The information in this article represents Peter Ghostine's own unbiased technical interpretation of the price charts and other data associated with the security or asset class in question. It does not contain an investment recommendation or offer to buy or sell any particular security. Please read our full disclaimer here.

 


 

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