January 30, 2018
By Mish Schneider
Now that the short-term floor trader pivot panned out so well, what do we look at next?
After 20 days of closing above S1, yesterday the S&P 500 closed below it.
Today, it gapped below S1.
We have a confirmed topping reversal pattern until SPY either clears above the recent all-time high, or corrects anywhere between 5-10% from the recent highs.
That means, if weakness prevails during this news-heavy week, SPY can see a correction to 260-272 area.
There are plenty of long-term indicators to keep eyes on now besides the confirmed topping pattern.
We could gaze into the abyss and see swirling, bubbling lava that swallows the bulls up.
Or, we could see psychedelic colors that alter the bull’s state of consciousness thereby alleviating their PTSD after a 2-day decline.
Either way, except for a few instruments, dip buyers were for the most part, absent.
Transportation (IYT) and Semiconductors (SMH) sectors have also been a focus.
Transportation IYT leading the market lower, broke down under a bear flag on the daily chart.
The Daily chart of SMH, even with the attempt late Monday to match the all-time high, continues to work off its topping pattern established on January 24th.
That pattern indicates that SMH can retrace to 103.00-97.00.
At this point, we are experiencing that perfect storm when SPY, IYT and SMH gave overlapping sell signals.
The question is, will dip buyers show up tomorrow?
Dip buyers have lots to consider. First off, the longer-term strength indicators still show risk on.
Secondly, neither SMH nor SPY have come close to breaking a key weekly moving average. In both instances, they have held this MA since November 2016.
Does that date ring a bell? Yes, right after Trump won the election.
Therefore longer-term, the market has not reversed the Trump bump.
Should SPY fail to return over 284.50, the sell-off will feel like falling into lava.
Should SPY rally and clear 284.50, then the bulls might think, “Who is to say what is real and what is not? Real is a distinction of a naïve mind.” Terrence McKenna.
S&P 500 (SPY) 284.50 is the place to clear
Russell 2000 (IWM) 158.50 is resistance and now the place to clear with 154 some support
Dow (DIA) 264 the place to clear for this to be good
Nasdaq (QQQ) 169.75 the place to clear. Look here for some leadership as it’s the only index to hold the fast moving average
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