MARKET GAUGE: Confirmed Uptrend
OVERVIEW: Three of the four major indices we cover here were able to rally Friday posting new all-time closing highs, while the Nasdaq 100 fell just short despite a gain of nearly 1%. Time has been able to heel some of the distribution wounds the indices suffered in late July thru early August painting a more bullish picture as of late. At the same time, the markets have been able to shrug off the geopolitical headlines, as well as the local political headlines that continue to hit here in the states. The current five month uptrend that was confirmed back in April is still in tact. We were close to changing our Market Gauge from “Confirmed Uptrend” to “Uptrend Under Pressure” back in late July, but the indices quickly caught support. Since then the picture has improved, so let’s take a look at the charts and see where we stand heading into next week.
SPY- After Vacillating across resistance levels at new highs, the S&P 500 ETF was finally able to crack the code on Friday with a gain of 0.60% closing at $287.51, good for an all-time closing high. The gain came on an increase in trading volume over the prior two sessions where the index suffered losses. Any worry over the three consecutive poor closes Tuesday thru Thursday were wiped away as the index closed right near its highs for the week. The index now sits about 2.5% above its 50 day EMA and a little over 3% above the current five month trend line. Despite all the worry and concerns in regards to trade wars and the like, the index ETF is up nearly 7% since the lows hit in late July when the market was flashing some troubling signs. Distribution days have been scarce as of late as they have dwindled down to just three over the last 25 sessions. Volume may be historically thin in August, but those who have stayed away based on this premise have missed some good trading opportunities.
NASDAQ- We have been watching the Nasdaq Composite for a possible bullish resolution of an ascending triangle pattern that has been in the works as the index has climbed along a five month trend line toward new highs, and at least for now that bullish resolution is confirmed. For now things look good with the index as distribution days stand at only four over the last 25 sessions, but as always there are no guarantees the index follows thru on this current technical pattern. Sometimes these patterns suck in traders looking for the bullish breakout, then stage reversals catching the majority off guard, so we must always keep our discipline and stick to proper position sizing with our trades and of course honor our stop areas. Just to clarify, for those looking at the chart wondering why Thursdays volume increase is not marked as a distribution day, the loss of just 0.13% on the day fell short of the technical qualification for a distribution day of at least a 0.20% decline.
IWM- The Russell 2000 which had caused us the most concern in recent months has quickly righted the ship after traders came in supporting prices in late July and mid- August at 50 day EMA and trend support. Time has taken care of a heavy distribution picture that had developed from late June thru July and the quick turnaround pushed price right thru resistance into new high territory this week. Again, this why we must keep up with the index picture on a daily and weekly basis so we are not caught off guard when markets turn. There are currently five distribution days in the current count, but one of those days will be removed due to time after Mondays close.
QQQ- The Nasdaq 100 fell just shy of breaking in to new high territory on Friday, but has set up the same technical pattern of the Nasdaq Composite. The index sits with five distribution days in the current count, but a cluster these days that hit the index in late July will be coming of the count due to time late next week. Perhaps the index joins the party at new highs next week.
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