Tuesday, July 5, 2016

SPX, NDX, BKX: BKX Lagging Considerably

Before I get into the charts, I just have to share an example of why trying to trade news almost never works.  These two headlines arrived in my email account on the same day, within hours of each other -- and they now hold a dear place in my heart as two wonderfully silly examples of why we don't trade news.  The bottom email arrived first:

Then to make the news cycle complete, yesterday, I received this one, apparently as a gift from the god of Irony:

Anyway, just had to share that, because the first two in particular, stacked as they were right on top of each other, actually made me laugh out loud.

Moving into the charts, let's start with BKX, which has been lagging the rally in most of the major indices.  I maintain that BKX often leads the broad market, so this picture is not terribly encouraging for bulls right now.  That can always change, of course -- but this might be an early warning in agreement with my hypothesis that SPX, even if it were to break the prior highs, is probably not destined for a big intermediate rally right now.

Next is a chart of NDX that bears a warning far ahead of where the market is right now, but worth looking at again anyway.  A sustained breakdown at the blue uptrend line would be first warning for bulls:

Finally, we looked at the bigger picture options for SPX on Friday, so today we're going to focus on the near-term.  I am presuming the rally is due for a pause (or worse), and on Friday, I discussed a real-time short entry on our private forum, at ES 2100:

In conclusion, I still do not feel the market is correctly positioned for a large intermediate rally.  A brief head-fake higher wouldn't surprise me one bit, but even that isn't guaranteed -- bears have, so far, held 2113 SPX, which keeps the most bearish options on the table for now.  If SPX develops a decent-sized impulsive decline, then we'll know to keep looking lower for another wave down to follow.  Trade safe.

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