15 years ago – Page 30 – Slope of Hope with Tim Knight

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A disappointing day for the bears on Friday, and the rising wedges on
SPX and EURUSD remain unbroken. Here's the updated version of the rising
wedge on SPX that I posted on Friday afternoon:

I've tweaked the ES rising wedge to fit better with the rising wedge on
SPX. Logically this also fits better now as the ES low was an overnight
low not shared on the SPX:

In retrospect it was a major tell on Friday that there was little
weakness on EURUSD, and that the rising wedge on EURUSD was not
threatened at all.

I know many don't believe that the correlation between USD/EURUSD and
equities is strong enough to trade, so I've marked up on the chart
below in red highlight where EURUSD has been in a downward wave, and in
blue highlight where EURUSD has been in a an upward wave. SPX is the
background to the chart in green.

My point here is just to show that in the last ten months, a period in
which SPX has made little upward progress, anyone who had been long only
when EURUSD was in an upward wave would be massively up, and anyone who
had been long only when EURUSD was in a downward wave would be
massively down.

Any significant retracement on equities will therefore be unlikely
unless it is accompanied by a downward move in EURUSD and identifying
the start that move is therefore of great importance regardless of
whether your bias is long or short:

There was some talk at the weekend about the bearish engulfing
candlestick on the Vix, but a bearish engulfing candlestick requires
that the previous candlestick be in the direction of the previous
(bullish trend). Friday's candlestick was a bid red candlestick after a
long downtrend, and immediately after a red candlestick the day before.
There was therefore no bearish engulfing reversal candlestick on Vix:

So where does this leave us? Exactly where we were on Friday morning
more or less. On EURUSD we are waiting for either a hit of the top
trendline of the rising wedge, now approaching 1.345, or a daily close
below the lower trendline of the wedge, currently slightly under 1.32.
On SPX we still have the strong resistance level at 1130, and the top of
the rising wedge is in the 1140 area. As the lower trendline of the SPX
rising wedge is rising at 5 points per trading day, it is at 1109 SPX
today.

Ideally we would see both SPX and EURUSD hit the top trendlines of their
rising wedges, as that would deliver the optimal short entry. That
won't necessarily happen though as both are up near strong resistance
levels. Either way both rising wedges are running out of road, and
unless they both break up, which rising wedges do 31% of the time, but
seems unlikely here given the overbought state of both on RSI and other
indicators, then I'm seeing the maximum that SPX can reach within the
rising wedge in the 1150 SPX area.

Last week I indicated that I would not provide the weekly sector report in the future. Given the feedback, I've elected to continue in a modified form–I will no longer prepare a chart book since this information is available on FINVIZ. I'll use this weekly post to highlight points of interest and to give you some links. While the job report delivered a disappointing number on Friday, the weekly sectors, except for banks, were positive. Healthcare (+3.17%) and Basic Resources (+4.13%) had strong showings. It is worth noting that Healthcare has been the worst performing sector over the last six months.

Here's a table of the sub-sectors that have the greatest short interest for the week:

Source: FINVIZ

Mylan Labs (MYL) has the largest short interest at a whopping 25.27%. Click on the ticker to see a chart.

Now let's take a look at the sectors with the highest relative volume:

(Source FINVIZ)

The largest relative volume mover (4.51) in Medical Practioners was Transcend Services (TRCR).

For easy to view charts on individual subsectors, click here to be transported to FINVIZ. You can order these charts in a number of ways. I hope that you find this new format helpful in providing an overview in addition to giving you some exposure to tools that can aid your own variation of research. I wish you good trading this week.