The monthly chart below shows SPY, the S&P 500 ETF with two indicators, RSI above the chart and PPO below the chart. RSI is overbought and there is a slight divergence, it has been moving lower while SPY was moving higher. PPO(1,120) tells us the price difference in percentage between the 1- period EMA and the 120-period EMA (10 years). The 1-month EMA is 53.698% higher than the 120-month EMA. PPO(1,120) has reached extreme levels, higher than back in 2007. Also notice that there is a slight divergence here too, PPO(1,120) failed to reach new highs.
A couple of things I want to briefly note about the weekly chart. RSI was overbought and has been moving lower since the beginning of this year even though SPY had higher highs. MACD is still below the signal line and the signal line is moving lower. ATR has been moving higher since the beginning of the year even though SPY has basically stalled.
The performance chart below shows the nine sectors of the S&P 500 with the S&P 200 ETF, SPY. As you can see SPY didn't go anywhere during the past month but four sectors, the financials, utilities, energy and consumer staples showed strength. On the downside health care and cyclicals where the weakest.
If you read my last couple of posts than you know that it wasn’t a surprise that the market moved lower during this week. This is of course not the end of the World but the way I see it the correction is not over yet. Next week we will possible see further decline. Corrections like this give a good opportunity to trade volatility, namely VIX. You can’t trade directly VIX but there are plenty of VIX derivatives available. The easiest thing is to buy VIX calls during a market decline. There were good entry points last week, now probably it would be too late. Good timing is almost always the most important part of a good trade. If you are in a VIX trade, don’t get too greedy, realistically set resistance levels. The daily chart below shows SPY with MACD and StochRSI indicators. Both indicators show a bearish bias. From the chart below it looks like the correction could take another week and a half. The Februaty low or the 200-day MA could be a support or maybe both.
SPY, the S&P 500 SPDR has been moving higher since the beginning of February as you can see on the daily chart below. The Money Flow Index (MFI) above the chart moved into overbought territory. The Vortex Indicator (VTX) below the chart, a trend indicator shows that the trend is losing momentum. The green line is turning down.
$SPXA50R, the S&P 500 percent of stocks above their 50-day moving average seems to be stalled at the 40% area. In the fairly recent past $SPXA50R bounced back from this level several times as you can see it on the chart below and that would be bullish at least in the short term. In the background you can also see that these low levels correspond to short term bottoms on SPX, the S&P 500 large cap index chart.
The daily chart below shows SPY, the S&P 500 ETF for the past 12 years with the 50-day, 200-day, 400-day and 600-day moving averages and the 600-day Bollinger Band. Below the chart there is the PPO(50,600) (green) and PPO(200,600) (red). PPO is the Percentage Price Osciilator which is a momentum oscillator similar to MACD. It measures the difference between moving averages as a percentage of the larger moving average. For example PPO(50,600) measures the percentage difference between the 50-day and 600-day moving averages. Notice that both the red and green lines are reaching unusual high levels. Also on the chart notice how the moving averages are fanning out and the lower 600-day Bollinger Band is curving down. Also the price is above the upper Bollinger Band.