With Friday’s close of the quarter, let’s take a quick look down this weekend. In Technical Analysis we talk a lot about looking at one or more time frames higher than the one you trade to get the bigger picture; similarly, this top down process looks at all the time frames to help us adjust our near term outlook and holding periods based on which levels are working better in the current market environment. If you are not familiar with my TP charts you can start with a these two posts here and here to learn more.
Starting at the highest levels we can see the strength the major indexes have seen since the 2009 lows, but nothing here on the RSI chart that screams that is ending. All three had strong candles this quarter and are on Nitrous in RSI bull ranges showing on this long time frame buyers are still in control. The RSI do remain elevated with $QQQ closest to 80, but in strong trends moves over 80 are better overbought signals normally. The CFGs in the bottom pain are also turning back up here before reaching oversold which also suggest the trend is still in the bull’s camp. This timeframe is helpful, but will take a long time to change character which makes it less directly relevant to most traders
Dropping down to the monthly view, we still see all in RSI bull ranges moving back over 60 recently and not overbought. $SPY $QQQ have already moved to new highs and backtested those in the case of $SPY. $IWM is not quite there yet, but has been the strongest move off the February lows. If October can buck the seasonality and see $IWM break to new highs it would be a pretty big deal and could fuel these RSIs to overbought before done, but again intra-month volatility can still be high enough to frustrate many out of good opportunities.
ON the weekly level, once again we see all three on Nitrous in RSI bull ranges, but not really near overbought territory on any of them yet. This level shows the recent breakouts and backtests on $QQQ and $SPY which proved to be successful so far. The CFG’s all just recently turned back up with $IWM and $QQQ not even breaking 50 on the pullback. It is the $SPY charts that is beginning to lag from this level.
The daily view is where we can really start to see the chop over the last couple of weeks that has created the volatility in both directions, without either side gaining any traction. Here to we see the $IWM is the only one that never lost the RSI bull range in September. $QQQ broke RSI 40 barely, but snapped right back in what we call a range spike. This is when officially the bull or bear range in RSI is broken, but quickly moves back over RSI 60 to confirm the bull range is still intact. In the Weekly time frame I mentioned the spy $SPY was lagging which comes into clearer focus as we move down to the daily level. The $SPY is the one of the three that actually looks like it could be shifting into a RSI bear range, but with it being the only one there yet, we want at least one of the others to join it before it gets more concerning. Overall the grind off the September lows has been good to see from a strength standpoint.
The 65min Charts actually shifted back into RSI bull ranges in mid September and are currently still holding them even among the chop we have seen. Friday’s closing candle does look ugly here and will be watched, but until we lose the MA bands and the RSI bull ranges break here the this level continues to support that move off the lows this month. Don’t read too much into that last candle as quarter end could have a bit of squaring going one. Monday will be here soon enough and our next set of candles will bring the next clues for us to work from.
After going through this drill down, the one thing that stands out to me the most is almost every chart on every time frame is currently in a RSI bull ranges and moving higher. Contrast this AAII bulls nearing the lows this suggests to me the wall or worry is still out there even with the progress the markets and their charts have made this year since forging those February lows. Now you know my views, feel free to incorporate that into yours any way you like and as always, I hope it helps!
Have a great week!