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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Bombs are flying as markets are dropping below January 2018 highs into the 2945 zone on $SPX. Internals have been weak for quite some time and the underlying individual stock picture is much worse than index charts indicate.
Hence it’s of interest to watch some of the signal charts and there is one chart that may actually suggest a bullish outlook, at least in the short term.
And that is the RSI on the cumulative $NYAD. When it hits extreme readings below 30 its history suggests a market bottom is near:
That was certainly the case in 2015, 2016 and in early 2018. Didn’t mean the lows were in on the reading, but that they were near.
How does this signal back test further in time, perhaps in context of a bear market?
Here’s a 14 year version of the same chart:
The larger message: In a bull market $NYAD RSI dropping this low often leads to a rally to new highs, hence a major market bottom. At times when markets move toward a bear market, low $NYAD RSIs lead to a sizable market bounce that can be sold for new lows.
Unclear which one this is yet, but sellers are on notice that a bounce of size is likely to emerge in the near term.
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Categories: Chart Chatter