Trade Talks Drive Market

This week, I might as well repeat what I said last week:  “Hope that trade negotiations with China will bring some tangible results have kept the SPX in an uptrend for the past few days, but the technical picture shows a market which is on its last leg.”  That last leg, however, is hanging tough. Under these conditions, technical readings can stretch out instead of producing more immediate results. With the negotiations having been extended into the weekend, even if some breakthroughs are achieved, some “selling on the news” could take place next week. Of course, there are other factors which are affecting investors such as what are the Fed’s intentions, and the signs of weakness appearing in the economy.

In the meantime, patience is worth its weight in gold. This extended rally has benefited the weekly indicators, which are positive and moving higher every week, while the daily have topped and are showing negative divergence. The hourly readings briefly went negative last week with an SPX decline of 25 points which was promptly bought when news emerged that the current talks would be extended. This has brought the hourly  indicators into another state of negative divergence which awaits the next decline.

Until last week, there was little congestion showing, indicating that we were not quite there yet. Congestion signifies that a bull/bear (demand/supply) battle is taking place with the one which is victorious determining the near-term trend. The next-to-last battle took place around 2650, with the bulls emerging as the victors and driving the index to 2735, where another brief skirmish took place (again won by the bulls) and resulting in getting us to where we are currently, with perhaps a little more to go. Stopping here would create a larger congestion level which, if the battle is won by the bears this time, could result in the beginning of a larger decline.

Chart Analysis  (The charts that are shown below are courtesy of QCharts)

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Analysis of the short-term trend is done on a daily basis with the help of hourly charts. It is an important adjunct to the analysis of daily and weekly charts which discusses the course of ...

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