Sunday, March 8, 2015

Mar 7 - Weekend update - Down we go!

Been pretty busy lately so haven't had time to post although I have been tracking the markets.  Based on the clean break of trend and volume spikes (although not huge) across all the major indexes, I am leaning towards more downside although there is a good possibility of some retracing and perhaps even of consolidation before another move up.  That said, based on daily timeframes on the MACD on the indexes and VIX, I would put the odds on a short term move lower.  I was fairly heavily long QQQ up to early last week and the false breakout caught my attention which later led to a reversal of my previous position.  That said, I don't have any downside targets and will start assembling scenarios after Mon/ Tues tells us more.

Although I was trading QQQ, I often also track SPY as it is often more indicative of the overall market health which I why I have marked it below.  Mar 3's failure to breakout was notable and was the first warning sign.

SPY MACD issued sell signal on the daily, which has been a solid indicator.  I only utilize strong MACD moves to avoid getting false signals, i.e. moving very rapidly downwards from very overbought readings.

4 of the last 5 major VIX MACD crossovers have led to short term corrections.

HYG (junk bonds) have been a great indicator and have often led major equities' ETFs before trend changes whether up or down.  In the last few trendline breaks, there has been a significant lag before the market rolled over so it is very possible the market creates some froth before potentially moving down.

$NYA and $WLSH I track because they have had more pronounced moves relative to the other indexes.  $NYA was showing more weakness prior to Friday's fall and the vol also confirmed distribution.  in $WLSH, when it approaches the upper trendline and slips under the secondary trendline (dotted) it led to further declines 5 out of 5 times.
 $NYA once again finding resistance and falling after another MACD cross.

For $VIX the market has had short term corrections in 4 out of 5 instances on what I would call 'strong MACD signals'.  
I don't use these indicators aggressively but $TICK has been displaying negative divergence which has led to falls 2 out of 3 times.  The time the signal failed, the market continued to grind up at a weak pace but eventually rolled over.  The $ONE:$VXO ratio is something I will watch in case we do correct as I will look to the yellow zone to confirm a tradeable bottom.

The QQQ major components all are showing signs of consolidation or correction.  All except AAPL have shown longer term negative divergence versus QQQ which is a warning sign for potential long tern weakness.  ORCL and INTC have particularly wobbly looking sequences.  GOOG looks set to pull back from overbought conditions.

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