Quick Market Thoughts

We've had a tremendous rally off the February lows.  The $SPY has rallied some $20, the $IWM has mounted a similarly furious rally.   Today the market is pulling back and the question is whether this recent rally was just a relief rally?  Or something more constructive to build upon?

Let's start with the $IWM.  Small caps are in a downtrend.  A series of lower highs and lower lows continue to get put in.  The chart is starting to take on the look of $XLE, the energy ETF, when it started its collapse last year.

As I said before the year started, I think the bull market is over.  The charts are starting to say the same thing.

 

If this market rally has legs financials will need to lead the way.  They, like the small caps, continue to put in a series of lower highs.  The trend for financials is lower.

It was a nice bounce of the lows.  The market has put in quite a rally.

A tell tale sign of this rally has been the re-emergence of the dip buyers.  Notice all the wicks under the daily candles since the lows in February.  Almost every daily dip has been getting bought.  At the start of 2016 the rips were getting sold and dip buyers were no where to be found.  When the dip buyers vanish and the sellers return, we will know this market is setting up for fresh lows in 2016.

Prices remain contained at the last bastion for the bears.  A break above opens up possibly months of sideways action before yet another lower high gets put in.  Either way I think prices will come down to make new lows before the summer of 2016.

See you in the chat room.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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