The charts below summarize my view of the market this morning.
Chart 1. The NYSE McClellan Oscillator ($NYMO) briefly dipped below the zero line last week for the first time since February.
Chart 2. The $XLU/$SPY ratio remains in an uptrend. It bounced off the 15-ema (our short-term trend indicator) four weeks ago despite the new recovery highs achieved by the major market indices. Investors usually park their money in relatively-safer, dividend-paying stocks during times of uncertainty. Except for occasional hiccups, the price action in the major indices has yet to justify their actions.
Chart 3. The $SOX/$SPX ratio, which has always served as a reliable forward-looking indicator, reflected underperformance on the part of the Philly Semiconductor Index relative to the S&P 500. A bearish Harami candlestick pattern is evident on this weekly chart.
Chart 4. The $SOX itself reached a crucial milestone last week, i.e., the underside of the neckline and the upper boundary of the Shark pattern's PRZ (blue rectangle).
Chart 5. The $SPX managed to reach the underside of its own neckline, simultaneously with last December's HVA (high-volume area) highlighted in chart 6 below.
Chart 6. The $SPX reached last December's HVA (2048-2058) last week before giving way to a ~2 percent profit taking phase. Whether more downside is in the card for this week remains to be since. However, the $SPX and other indices have managed to print bearish Harami patterns on their respective weekly charts.
Chart 7. Compared to the other major indices, the $RUT sports a relatively clearer wave structure, suggesting another down leg is forthcoming. Whether last week's weakness was the first shot across the bow remains to be seen. Keep in mind, however, that tops often take weeks to form, as shown in chart 5 of the $SPX.
Chart 8. The $SPY's options open interest reveals big bullish bets at the 204 and 207 strikes. The $SPY's weekly vPOC (volume point of control) is at 204.40. If it can take out this level and remain at/above it for much of this week, the 90,000 'bets' at the 207 strike could very well prove right by the time the NFP report is due on Friday. This would be consistent with the $SPX's measured move of roughly 2084. However, it's important to keep an eye on the milestones reached last week by the various indices and relative-ratio charts shown in this report, looking for decisive breakthrough action.
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