Stock Price Divergence And Potential Signs Of Risk

(Click on image to enlarge)

We cannot begin the Daily without a mention of the glitch in the NYSE right out of the gate Tuesday morning.

A wild stock-price swing occurred at the open and 84 stocks suddenly plunged or spiked causing volatility triggers and trading halts.

The event is now under investigation.

The chart of Wells Fargo (WFC) is a prime example of how this glitch wreaked havoc with a low price of $38.10 before rallying back up to $45.00

Perhaps we can notch this up to “Another Brick in the Wall” of chaos leading to inflation.

Regardless, with earnings season in gear, the market will focus on the guidance and future outlook of many of the large corporations, so today’s glitch could be an aberration or the universe’s harbinger of things to come.

Monday, we focused on the trading range, calendar ranges, momentum, junk bonds’ performance, and the very high probability of a rally into resistance.

Today, let’s narrow it down to another of our key indicators in our Big View market timing service

Long Bonds versus High Yield Bonds

(Click on image to enlarge)

Tuesday’s action settled into more of a digestion day in the 4 indices.

The small caps or Russell 2000 (IWM) had an inside day meaning it traded within the trading range of Monday.

The 6-month calendar range high sits just above current levels in the small caps. Hence, we need clues from the internals on next big move up or down.

The iShares iBoxx $ High Yield Corporate Bond ETF HYG looks ok as far as price.

Our Big View defines the relationship or ratio between HYG and TLT as a measure of the relationship between risky high-yield corporate debt (HYG) versus the safety of U.S. Bonds (TLT).

“When the ratio is trending up and the distance between the ratio and the moving average widens, it identifies an increased appetite for risk in fixed income markets.”

ETF Summary

S&P 500 (SPY) SPY has crossed the 200-DMA and is now slightly above it, but is still a very narrow price range below to 50-DMA. Held pivotal support and now what was resistance is support at the 200-DMA and resistance is 405 overhead.

Russell 2000 (IWM) Filled the gap and continued to hold the 200-DMA and overhead resistance at 189.

Dow (DIABack under the 50-DMA STILL as industrials lose ground to tech, but holding support at 335 and crossed the 50-DMA barely.

Nasdaq (QQQ) Crossed the 50-DMA on Friday to close above. First level of resistance is at the 200-DMA and closing slightly below it.

Regional banks (KRE) Close to crossing 60.72 (50-DMA). First level of support is 58 and resistance is 50-DMA.

Semiconductors (SMH) Still holding key support easily at the 50-WMA and 200-WMA. 230 support and 238 resistance.

Transportation (IYT) Still holding 225 key support here and now holding first level of support holding 227. Overhead resistance is 232.

Biotechnology (IBB) Still best sector with 132 key support still holding and holding first level of support at 134 now with 137 resistance.

Retail (XRT) Holding pivotal support at 63. Resistance at 68.

More By This Author:

Momentum V. Price - Is The Stock Market Rally Over?
Stock Market Outlook: New Year, New Calendar Range
The Shiller Ratio Is Telling Us There Is More To Come

Disclaimer: The information provided by us is for educational and informational purposes. This information is based on our trading experience and beliefs. The information on this website is not ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.