Running Down the Triple Play
Pretty easy to see I don’t find much time to blog these days, but I do like it when Month or quarter end come at the end of a week as well. It makes it easy to start at the top time frame and work our way down the charts to get an idea of where we currently are in the broad markets these follow both individually and in relation to one another. August ended Friday so we will start with the Monthly charts this time.
It has been a while, so for a quick refresher on these charts check out RSI Chart Explained
Monthly
The monthly trend remains strong after pausing the 1st half of 2018, but now looks to be on the march again. The RSIs are at or near 80 which should have us alert to changes and are likely to see more volatility up here, but they are not a sell sign in themselves. I did read someone talking this week about selling once RSI moved over 70, and I couldn’t disagree more, especially on a time frame as long as monthly. Indicators are for information and alerts price is better suited for actual signals. It is good to see how this charts is moving and keep it in perspective that things are getting elevated but also moving in a strong trend at the moment.
Weekly
The weekly charts shows the strong trend on this level coming off the Winter pullback/volatility we saw. Coming down to this level you can see that the battle was fought and won by the bulls and we are in the midst of the extension that followed. Currently the RSIs are pointing higher but not particularly elevated. CFGs are nearing the 100 level which is where we start paying more attention, but they can move all the way to the 140-150 level if things get goofy, so 100 again isn’t particularly out there. $IWM $QQQ are well above their January peaks, but $SPY is just know moving above its level. This has us on what for a failed breakout at this level which could usher in the seasonality everyone is talking about. Especially with August being strong, the next drum beat has to be a ugly September and October. I don’t think it has to happen as many do, so I am keeping my eyes open for an extension higher that keeps everyone off guard; but I do think it would be a decent scenario to see some weakness between Mid September and the elections to allow the markets some digestion time and maybe even a few backtests to strengthen the support zones below.
Daily
The Daily level looks set up more similar to the weekly charts. Nice pattern breaks recently and a new leg higher. $IWM was the most defined and worked great after finding higher lows at the MA bands 3 times it finally went out the upper rail. $IWM also finished the month on a strong note. $SPY $QQQ ended in small consolidations right at the highs. Nothing to get bearish about, but more digestion would be fine here as long as it stays contained. While not fearing seasonality, it can be used as a piece of evidence to help guide and potentially adjust things like position sizing and stop placement during a slow period. Again, we see the CFGs are at or above 100, but can stay up here a while or put in divergences before seeing a larger price top. Worth noting again, multiple divergences are not uncommon on the upside, so making sure you have some other confirmation is a good idea.
65 minute
The 65 minute chart is the Intraday charts I use most and post when looking at market direction. If trading very short term, then 5, 15, 30 minute might be worth a look, but they don’t really add value in this kind of analysis very often. The current 65 min charts are all still in RSI bull ranges with mixed positioning to start the week. $SPY $QQQ are digesting the strong recent runs since mid August. $IWM is moving too, but in a much more sloppy fashion. It broke out strong mid August, but has been a battle ever since. This was another place many were looking for a failed breakout the whole way and every time they felt like they might be getting a foothold, buyers showed back up and pushed $IWM back to highs. A quick look at it’s RSI shows the grinding nature of this move and also gives a good example of why we use RSI Range Rules instead of overbought/oversold signals.
This is just a quick review of how I see the markets going into the current week. I also see strong breadth underlying these price charts which adds confidence to what we are seeing on the price charts. This could certainly take a turn at any time change my view along with it, but as we sit now, markets are a leg that started in later July or early August and could persist a while if these dynamics remain in place.
Good Luck and I hope this helps!
