Market Analysis

Weekend Charts: Jan 20

Introduction: Consider Weekend Charts as an ongoing follow-up to my 2018 Market Outlook. I’ll be sharing high level technical observations on a weekly basis whenever possible. For other public analysis please see Market Analysis and/or videos. For more detailed analysis, including technical SetUps, please visit Services.

Markets continue to be driven by record ETF inflows and FOMO.

As I’ve pointed out on twitter the $SPX is following an extremely well defined sturture of parallel channels:

I’ve also previously outlined the 15 min chart which continues to dominate price action and this week’s “dip” and low again coincided with an oversold reading on the 15 min chart:

So far in 2018 markets are following a repetitive structure as intra week dips are bought and every Friday closes at new highs. Here are the past 3 Fridays in 2018:

Friday #1:

Friday #2:

And Friday #3:

I trust you spot the trend. I can literally draw the same line from left to right and always end up at the same result: Closing at the highs of the week no matter what happens in between.

Building on the excesses of 2017 with a continued price advance higher charts are printing some of the highest RSI readings ever. Most predominantly we can observe the $DJIA currently on its highest monthly RSI reading in over 100 years:

As I pointed out on twitter $DJIA is now so far extended in price it is completely outside its quarterly Bollinger Band:

There is zero price history to suggest that such a trajectory is sustainable, rather suggesting that a reconnect with the upper Bollinger band and/or the 5 EMA are highly probable. This represents a corrective risk range of 1,500-2,600 points at the moment.

Global indices are on a similar path:

Past periods of similar extensions have produced price retraces into the middle monthly Bollinger bands and risk continues to build for such a reversal especially as this extension is without precedence.

As the chart above also highlights this past week registered a rise in the $VIX despite continued price increases. Indeed the $VIX closed above it’s 200MA on Friday:

The long standing wedge pattern and current higher lows continue to suggest that a surprise spike into the open gap zone is in the market’s future.

The historical context continues to suggest that such a test may lay close at hand. $SPX is now overtly pushing over the 1987 trend line as the 10 year is pushing over its 30 year trend line.

The sustainability of this chart presents a key test for markets in 2018.

Given the historic price extension in markets a sizable technical MA reconnect in Q1 remains part of the risk outlook, and both daily and weekly charts inform of the risk range:

Without a price break below the daily and weekly 5 EMAs markets continue to look to be sailing smoothly.

Just watch out for those surprise waves:

Too early to say whether the government shutdown now in effect will be the trigger to disturb this voyage. Market data for previous government shutdowns has been mixed, but then none have ever been met with such extended technical readings leading right up to the shutdown.

For now markets are following this script:

We’ll see how this turns out.

All content is provided as information only and should not be taken as investment or trading advice. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. For further details please refer to the disclaimer.


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