3 weeks until the end of the quarter. We’ve had a big correction in this first quarter or at least so it seems and markets continue to ping pong in a range between the January highs and February lows for the moment. Yet if you look at quarterly charts there is hardly any evidence that a correction has even taken place.
I’ll walk you through some base observations of key index and select stock charts and you’ll see my point.
Let’s start with $SPX:
See any red? Neither do I:
10 quarters in the green in a row. So far. The poke above the 30 year trend line produced a reconnect with the quarterly 5 EMA, but not much else so far.
$NDX: What correction?
$NDX hasn’t even touched its quarterly 5 EMA. In fact, it hasn’t done so in 4 quarters.
$DJIA: What correction?
As $DJIA became historically extended above the quarterly Bollinger band in January I made the following observation:
$DJIA quarterly chart
Price entirely outside the Bollinger band.
Historic sample size of this remaining the entire quarter like this: Zero. pic.twitter.com/x50rN3pkDh
— Sven Henrich (@NorthmanTrader) January 16, 2018
Since then we’ve seen a reconnect with the upper Bollinger band and bounced:
But no reconnect with the quarterly 5 EMA and price remains above the quarterly Bollinger band.
Much of this index action is due to individual mega cap stocks.
Ok, I can’t resist:
$AMZN: What correction?
Granted there has been some backing and filling and some price expansion, but absolutely no technical correction of note has occurred in any of these stocks, just some nice volatility expansion, that’s it:
As traders we love volatility so it’s all good.
But if anyone tells you we’ve had a massive, scary correction show them these charts and ask them: What correction?
And if no real correction has actually taken place, then a real correction may still lie ahead and some of these quarterly 5EMAs are initial targets and, given how extended above some of these stocks are, these reconnects would constitute a real correction.
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Categories: Market Analysis