Welcome to Chart Chatter where we discuss various technical charts we find of interest. We cover indices, signals and stocks on different timeframes highlighting different technical techniques we use over time. We’ll focus on key observations we find relevant which readers may find of use for their own trading.
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The $WLSH contains 3,486 components and is the broadest US stock index and hence is an interesting index to watch for overall market performance.
Like many of the index charts we are tracking it has been in a very well defined channel over the past few months:
It poked above the channel making new all time highs in August and is now again making new highs today on a gap during quad witching OPEX week. As such $WLSH has upside risk into its upper channel again, but currently price is still within a smaller channel that has recently formed.
What’s notable about $WLSH and all the other index charts is that new highs are coming on very distinct negative divergences. The index is now up 6 months in a row and its current monthly structure looks eerily similar to one we have seen before:
As long as $WLSH remains above its monthly 5 EMA the current bullish price action may sustain itself, however a break below the monthly 5 EMA may trigger a larger selloff. The 5 EMA is currently 3% lower than current price and is a key zone to watch on any market weakness.
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