A Look at Friday's Distribution Day (by Drew)

Hello Slopers, Drew here. I hope all of you had a great weekend. I have been busy responding to custom T/A requests, but I am ready for another exciting week. Monday is here and it is time to get back to the markets. Before looking forward to the week ahead, lets examine the distribution day (NASDAQ) from last Friday.

On the 60-minute S&P charts, it is easy to see the "zig-zag" action of the last week. It does look like we will be making a move toward the ascending channel's support line. Some may argue that the S&P confirmed a neutral range breakout on Friday, however the close of 1079.60 did not signal a decisive break of the neutral range in my opinion (minimum 1-2% confirmation never reached). I have highlighted a couple of potential scenarios on the second chart. We may be building a descending triangle but this is unconfirmed, or we may just continue to form a rectangle in the 1080-1100 range. This price range remains the key area to watch this week.

On the daily charts, the S&P 500 avoided a distribution day, while the NASDAQ picked one up on heavy volume. Both indices are now sitting at four distribution days for the recent period, a very bearish sign. We have seen this pattern before, take a look at the action during the first half of June before the market went into a correction. However, we have seen many times throughout this rally that the market can nullify any of these conditions quite quickly. So with that said, it is wise to wait for price to confirm any reversal, and use tight stops when trading against the primary trend.

Turning to the Dollar, it looks like this recent slide may be coming to a pause. We have bullish divergences on RSI and MACDH, and we have seen price begin to curl higher. Lastly, the ADX line may be signaling that this downtrend is a bit overheated , I am waiting for a confirmed cross between the -DI line and the ADX. The big picture is still quite clear, the primary bear trend in the Dollar is still healthy until we see a technically confirmed reversal in price.

As always, keep an eye on the long term trend. Also be sure to check out our recent Trade Idea on SRS.