Markets – Macro – Technicals

The Wilshire Connection

ConnectionGetting weaned off of QE is going to be harder than Popeye Doyle’s efforts to go cold turkey after his forced Heroin addiction in the French Connection. I’ll probably have more things to say on this over the weekend, but suffice to say the renewed drowning in stimulus introduced by Super Mario created havoc with the Euro yesterday.

It’s been quite the week altogether as the bullish crescendo seemed to reach a peak as ever higher price targets for the $SPX were issued daily. 2,200, no 2,300, no 3,000! Despite all this fevered pitch in addition to the QE announcement and the interest rate cut by the ECB it all has failed to materialize any gains on the major indices vertical magic Friday ramps notwithstanding:

SPY

Principally the action has been exemplified by gap ups and sudden magic ramps that were sold into. The choppiness made for some good trading if one was positioned properly into the ups and downs. And like Popeye Doyle it requires a tenacious reading of the signals to stay ahead of the developments.

Yet the daily action obscures the larger trail and the trail leads us to the Wilshire Connection. What is the Wilshire? Well, it is everything, all stocks:

Wilshire5000

And the Wilshire ($WLSH) is sending quite a signal:

$WLSH

Its main signals:

1. The RSI is turning south and from a weaker level than at the previous high

2. The RSI is turning south while the $WSLH is still very far disconnected from its monthly 5EMA/8MA. Why is this important?

3. Because it relates to the monthly MACD. The coming reconnect of the MAs will not only drive the RSI lower it will create a very high probability scenario that after 4 years the monthly MACD will finally cross-over.

This would be seismic shift for this market and bring about the elusive corrective scenario. The principle target would be the middle Bollinger band which we haven’t tested since November 2012, the launch of QE3. Note: Would love to trade long there for a nice bounce.

But Alibaba and $AAPL first next week and then off to OPEX. Lots to happen and lots of magic ramps between now and then I’m sure. But don’t forget about the Wilshire Connection 😉

More to come this weekend.

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  1. Weekend Charts: Rally Myth Busters | NorthmanTrader
  2. Weekend Charts: Cutting Through The Noise | NorthmanTrader

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