This is what the tea leafs are whispering this weekend:
Distinct divergence in the medium term NYMO (McClellan oscillator). Word has it those divergence are less reliable in an uptrend. My orange marker begs to differ.
This is a chart I used to peddle every once in a while on a blog that is now long forgotten. Doesn't mean that it has no predictive value. What I find interesting (in a purely academic way) is how stubborn the MA stayed glued to the top of this down channel in the first half of the recent ramp up. Seems to me retail traders were a bit skittish at first but are now chasing the tape that 'must invariably make a b-line to SPX 1,200'. Or maybe not – I just work here 😉
I know – I know – being bearish these days is as popular as passing a fart in a stuck elevator. I suggest you hold your nose and do what the charts are telling you – I for one expect a correction is in order. Either that or TA is dead and in that case I might as well start shining shoes at LAX whilst giving out stock tips to hapless strangers.
UPDATE: Someone asked me about my BAA-TYX chart and I don't see anything salient on that one yet. However, hat tip to ultrabear for sharing the following chart with me a few days ago:
Notice the bullish divergence that played out in March of 2009 – we are now seeing a bearish divergence and in the context of the two charts above caution should be heeded if you're heavily exposed to the long side. Of course all these charts are medium to long term – so we might see a bit more upside before this thing breaks – but break it will.
Enjoy your Sunday – next week should be fun 🙂
Mole
