Daily Market Brief

Sweet Highs Are Not Made Of This

Markets put in another ‘V’ bounce performance this past week that looks impressive on the surface with the Trannies putting in new all time highs. Yet sweet new highs are not made of this. In addition to upward sloping $VIX seasonality possibly about to hit markets at a time of historic stretch signs of underlying weakness may reveal this bounce to be more feeble than it appears:

Each time the $SPY approaches the same price area we observe a weakening of relative strength in RSI and MACD indicators (I won’t even mention volume):

SPY daily

The drubbing in tech and small caps is certainly a contributor to this weakness and in fact a look at a monthly macro chart is pointing toward a emerging trend change that has been building since the beginning of the year and was pointed out on this site earlier. The $RUT in particular is showing a change in its historic run-up with likely appointment with its middle monthly Bollinger band in the near term:

Rut monthly

Does any of this preclude the market from making new highs? No, but it does highlight reasons for caution and I would argue sweet highs are not made of this:



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