Monday, July 27, 2015

Analysis of US stock indexes

First, a 15-month daily chart of SPY:

Stocks have traded in a tight range since December 2014 and especially since February 2015. The profitable approach has been to buy weakness and sell strength. Will this playbook change? Let's look at the other indexes.

The next chart is the NYSE index:

In April 2015, we considered whether the NYSE index was breaking out of a massive continuation H&S bottom to start yet another uptrend in our current epic bull market. Now, a much more bearish possibility seems likely. Repeated attempts to close and stay above the 11,100 level failed and the NYSE is now breaking down from a possible bearish rising wedge. Prices are breaking down after retesting the lower boundary. The next critical test will be the 10,650 level that provided support at the lows of March and early July. If 10,650 does not hold, then the NYSE will have broken down from a well-defined H&S top within a rising wedge:

Stay patient and calm. Participate with the trend rather than trying to predict the trend - which is impossible. And remember: if we don't want to trade, then we don't have to trade.

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