Let’s take a look at nine index charts, augmented by the standard trio of exponential moving averages (50/100/200).
First up is the NASDAQ Composite. Tech stocks have been grinding around and making no real progress since before Halloween! The bounce of Friday petered out on Tuesday, and we got a nice, reassuring red bar on Tuesday. Notice how prices are treating the 50-day EMA as resistance.
The Dow Industrials just keeps making records, but take note of today’s shooting star, is a short-term reversal pattern. Also notice the substantial distance between the moving averages and present price levels.
The NASDAQ 100 is very similar to the configuration of the Composite: the 50-day EMA as resistance, a recent series of lower highs, and no net change since late October.
The Russell 2000 has been strong for months, and its only potential turnaround point has been the island reversal gap, which is anchored to that dashed red line. So long as it does not exceed this level, the bears have a chance. It’s also interesting to note that the last two bouts of weakness sound firm support at the 50-day moving average.
The semiconductor index is showing no signs of breaking down (although I wish it would!) It has been cleanly within its ascending price channel for ten full months, and it is sailing smoothly above all its EMAs.
The S&P 500 still holds out a little hope for the bears, although Wednesday morning’s jobs report could tilt things hard one way or the other. As it is now, it has hammered out lower highs, and the mega-bounce Friday finally exhausted itself early Tuesday.
The strongest index of all, which has been an absolute dog until recently, is the Dow Transports. This sucker is miles above even its 50-day average, and it’s seriously overdue for a pounding.
The gold sector is obviously in a class of its own, unrelated to normal equities. It has been in an apologetic bull market for years, and even sustained selloffs during recent months have done nothing more than eased prices back to the highest moving average.
Lastly, the EMAs have become very compressed for volatility, indicating just how moribund the VIX has become. This seems primed to blast higher. All it needs is a reason.
I amped up my risk exposure from 80% to about 120% over the course of Tuesday. Let’s see if that was smart, or a blunder, once Wednesday opens.
