A Shrink, Tweezers Top and Topping Tails

The release of the Non-Farm Payroll information comes Friday morning and everyone expects it to be an ugly report. But how do you game that information? If everyone is expecting a near zero number would they really just wait until it comes out to do something about it? Of course not. But if everyone is positioned for that number than how do you position for a miss? There are games being played all day long and every day around these information releases. And this is why the pundits are often surprised by a negative market reaction to good news even if that good news was supposedly better than anticipated. They then make up catchy phrases like ‘Sell the News’ which after it is said a gazillion times starts to stick.

So what to do? You can go lie on Dr. Phil’s couch and let him unwind your circular logic or you can just follow the price action. As we prepare for tomorrow’s news there are more storm clouds gathering in the market. The Macro Month in Review this morning pointed out that the market is set up bearish from a longer term perspective. And Thursday’s price action indicates that the short term view is now leaning that way as well. Each of the major Equity Index ETF’s, the $SPY, $IWM, and $QQQ has it’s own way of telling us through price so let’s take a look.

S&P 500 SPDR, $SPY

The $SPY printed a Tweezers Top the last two trading days. This is a bearish reversal pattern, that is not always reliable. But it is significant because it happened at a double Fibonacci level. The advance stopped at 123.40, a retest from below of the 38.2% Fibonacci from the September move higher and 123.38, the 50% retracement of he move from the high to the recent low. It also did this with long topping tails on the candles and with volume decreasing as it rose. The Relative Strength Index also is curling lower after touching the mid line and the Moving Average Convergence Divergence (MACD) indicator has leveled after moving higher. All these together suggest a downside move to come.

Russell 2000 iShares, $IWM

The $IWM has had a series of three candles in a row that have long upper shadows, topping tails, as it hits a 38.2% retracement of the recent move from the highs in April to the August lows. It also shows the RSI turning lower and the MACD starting to wane. This is also in the bearish camp on a short term basis now.

PowerShares QQQ Trust, $QQQ

The $QQQ also printed a Tweezers Top, but with long upper shadows and at the 50 day Simple Moving Average. It has a RSI that has rolled lower just over the mid line and a MACD that has gone flat. And like the SPY the volume has been decreasing on this rise. Also moving to the bearish camp short term.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus
Dragonfly Caps Blog