The Indices opened higher today but there was no follow-through. That led to a rotation down and a test of the short-term support levels. While the internals did not suggest a strengthening to the downside, a break of support should see confirmation with the internals. Employment numbers are out Friday and there is a FOMC announcement on Wednesday of next week. Because the Indices are at important resistance areas, it may be they are waiting for the coming news to give price development it needs to breakout of the current short-term rotation.
The Indices were still in a pause mode in today’s trading. The hourly buying and selling tails suggest neither buyers nor sellers could gain control today. However, while breadth and volume declined somewhat today, other internals are still strong and not declining. Employment numbers are out on Friday morning and they could give the market the fuel it needs for a breakout in one direction or the other.
The intermarket divergences expressed by the Indices today was simply amazing. The SPY and QQQ opened lower, only to recover with the SPY testing its upper extreme and the QQQ testing its lower extreme. This occurred while the Russell continued to explode higher but on decreasing volume and breadth. The resolution to this will should be seen tomorrow.
The SPY broke out on a short-term basis today and tested longer-term resistance. The QQQ is lagging. However, the IWM on a short-term basis exploded but has a lot of catching up to do on a daily chart. Important to the current intermarket divergences is the fact the internals are strengthening nicely. As you will see in the Briefing, volume, breadth and other internals are all strengthening nicely to possibly support a breakout move. Keep in mind, there is still a possibility we could see another rotation down, but the internals are suggesting that is a lower probability.
In the last hour of trading, there is an intermarket divergence between the SPY and QQQ. Volume spiked on both in that last hour, however the QQQ did not have the price movement the SPY did. The resolution to that divergence should be seen tomorrow morning. If the SPY breaks out and the QQQ do not follow, expect the breakout to fail, especially if breadth is not increasing.
The Indices opened higher today, likely due to the GDP numbers. However, there was a real lack of internal strength and price collapsed back into the recent trading range. The SPY is now testing the lower extreme and the QQQ is in the middle of the range. Volume declined again today, thus causing buyers to cover their positions.
The Stock Indices are currently in a multiple timeframe rotational pattern. Short-term they are rotating at the upper extreme of a longer-term rotation. A break of the short-term may offer an indication of the next greater degree time and price move. At this time, the internals are not supporting a move in either direction and the market is neither overbought nor oversold. This is taking patience. However, when a break comes, it should be a good move.
The holiday pause was still in effect in today’s trading. Important to the rotation we are seeing is that it is occurring at very important resistance. Therefore, a break of short-term support or resistance may suggest the next larger degree time and price move.
As we get closer to the Thursday holiday, volume continues to decline. While today was an inside day and suggests a possible good move, I am very cautious during low volume periods. In any event, the QQQs have traded back through their breakout point and the Russell continues to show more weakness. Use caution for the balance of this week and enjoy the long weekend holiday.
A discussed in the weekend Briefing, the SPY and QQQ broke out to the upside and made a decent move. Breadth was basically neutral from Friday but volume was extremely low, most likely due to the holiday week. What was the breakout point is now very important support. Any trade back through support will suggest possible exhaustion of the move.