Those who follow my Triple Play Charts regularly on Stocktwits and Twitter know this as one of the momentum based trend gauges we use to guide us through the markets. I post the same two charts every day which on one hand can get monotonous, but I feel the consistency keeps us updated on the ever changing view of the markets while also helping teach us the personality traits that can give clues in the future. I wanted to do an end of year review. In this exercise I take a look from the quarterly view using Index charts (since the ETFs don’t really go back far enough to use my indicators at this level) and methodically move down to the 65 minute chart that is part of the daily routine. Let’s get started.
This level is for a 50000 foot view or a very long term investor. Don’t forget as we move down each time frame how much time each one devours to make a new candle. This quarterly chart is made up of the $RUT $NDX and $SPY since the $IWM $QQQ $SPY ETFs don’t have enough history to complete the charts. These cover the last 26 years of data give us a view of the long term uptrends we are seeing across all three at this point. This uptrends started in 2009, but do not signal the start of this bull market in my opinion. The recent consolidations on this chart I believe can serve as reset which means the new bull markets is less than 15 months old by most measures. The biggest detractor here is the $NDX ended the year with a d0ji with RSI elevated, but also firing a high level RSI Positive Reversal as this chart finally breaks above the 2000 highs. Even elevated, the RSI Positive reversal suggests the move might not be ready for a larger consolidation just yet. The $SPX chart also shows an RSI over 70, but a new longer term CFG Positive Reversal fired there as well in 2016. Finally, the $RUT is coming out of a long consolidation with a +20% drawdown or bear market and now has its own RSI (tighter) and CFG (longer term) Positive Reversals firing as it closed the year on a strong breakout. RSI are elevated but still acting pretty strong and all CFGs are turning up without making it down to Oversold territory.
The Monthly ETF charts are all in RSI bull ranges and have been since late 2009 for $IWM $QQQ and late 2010 for $SPY. We have seen a few deeper pullbacks along the way (especially in $IWM) but all in all the longer term RSI bull ranges have held very well and CFG getting to or near Oversold levels has serves as decent entries. All of the RSIs have been trending higher since early 2016 and are just now moving back over 60 giving lots of room to move higher if they want it. We even saw the $QQQ & $SPY hit the Nitrous Button closing the year with $IWM not far behind and trying to play catch up. Divergences are potential here and would be a warning, but I believe it is too early to start that talk until they form a little better. The biggest warning I see here is the waning CFG here before getting over the 100 level showing a loss of ST momentum into the end of the year, but the elections might have been a culprit there. The Monthly RSI bull ranges are fully intact after being tested in early 2016 and now heading back higher over 60. Many will see this a sign of getting overbought, but a strong RSI can run for longer than most believe. The set up here remains one of strength with potential to continue higher.
The Weekly level is where things start to get a little more wiggly as larger black candles have began to show up. $IWM & $SPY look fairly extend and could easily pull back some or flag a while longer without much if any damage to the higher time frames. The RSI aren’t particularly Overbought, but are rolling over a little here. Interestingly the $IWM & SPY are also hitting the Nitrous here which always catches my eye. I want to see if these pullback remain muted and just flag from here. $QQQ is in a little different spot just breaking out and now backtesting those previous highs with RSI finding some resistance at 60. A successful backtest here could set the tone for all the major indexes in on this level. Weekly charts are starting to show signs of a reversal or consolidation, but too early to tell how it will materialize. I would cue on $QQQ & $IWM to dictate market direction in the early part of the year.
The Daily view shows after consolidation most of December after the early surge with $QQQ struggling to hold the recent range break. All three are still in RSI bull ranges. $QQQ looks the weakest, but if it can reverse with RSI remaining above 40 and without turning down the MA bands it will be a good sign. $IWM $SPY still have a good ways to go to test RSI 40, but they don’t have to get all the way there, a reversal at 50 is fine and might be all we see with almost 3 weeks of sideways to down action behind us here. One thing I do like seeing is the faster CFG getting close to Oversold levels without seen a lot of damage to the RSI. if the CFG can reverse form Oversold before the RSI break their bull ranges (40) then it can often lead to a nice move higher to continue the trend. A reversal of trend can strike at any time, but all with all the higher time frames still in RSI bull ranges, we are watching to see if the daily charts can hold their respective RSI bull ranges on this consolidation. If so, the trend can continue higher sooner than later, but if they fail we can move a little more cautious and wait for them to set back up and align themselves again. The 1st tell her is likely the $QQQ since it is already pressing down on some important levels to start the year.
The 65 minute view gives us a good breakdown of intraday price action which is currently losing momentum and ground as all these charts are in RSI bear ranges to start the year and need a move back over RSI 60 and the MA bands to improve the picture. Until that happens the burden of proof is on the buyers to show up and take charge of things. The $IWM looked the best into the close with multiple divergences showing and the best RSI & CFG levels, but that is not saying much. $SPY & $QQQ both look extended to the downside short term, but it will take some heavy lifting to shift these back to RSI bull ranges. That said, being an intraday chart, that lifting can be done within a day if aggressive enough, but is more likely to take a few days to week to play out and see if a shift back to the upside can happen before we pull the Daily charts into larger downtrends.
Good Luck and I hope this helps!