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Monday, June 5, 2017

Market Alert/ Update 6/5/2017

Last week, after watching the S&P regain the 2400, and the DOW... 24000, I called for the market to continue to break out, and here we are.

It's not east to be bullish one week, and bearish the next, but Friday felt like capitulation for the retail short sellers, and the market has traded into what looks like a megaphone top, which can't be ignored, because this pattern points to a possible wave 5 triangle pattern. It's a tough pattern to identify, so I'm less than 50% certain, and most pro short sellers are on summer break. I warned folks not to sell a dull market (going into a holiday), and all we've seen over the past several weeks is short squeezes, in beaten up names, and even some high flyers, like Broadcom (up on news).

Getting back to this complicated topping pattern in wave 5 - there's also a good chance this is only wave "iii" (of V of 3), as illustrated in the chart below. If instead of stocks selling off into what looks like a crash, we only see a pullback to the bottom of the range (around the 2375 level), that would be a tell.

Even a pullback to 2325 doesn't rule out a broadening triangle pattern in wave 5, but only sets up for another short squeeze in July. This seems scenario seems even more likely, when you consider that Money Managers, are going to be forced to chase performance, when they return from summer break.
This hypothetical $SPX broadening top pattern is laid out in the chart below.

Short term resistance on the $VIX looks like 14.86, which would be high for this time of year (summer).

Oil - The oil trade seems more straight forward. This could be a pivotal day for Oil, and we've seen it go from green to red overnight. Good chance that's a bear trap.
Oil looks like it's traded into a wave A triangle (seen in purple). Wave B is a more complicated consolidation, and could take much longer to develop than my dotted lines depict. Wave B is not a great trade, but the first leg up should be a decent trade nonetheless.

Possible bear market in Financials, and a wave 3 of 3 would be devastating. The $RIFIN chart has also traded into an obvious bearish H&S pattern. Maybe financials lead the way down, maybe overbought $SOX, and tech.

Biotech and the $RUT had nice runs last week, as predicted, but I can only watch so many sectors at a time, and only so much time to write in the morning. If you want certain sectors charted, make a donation to this website, and I'll take it under consideration.
Thanks for following, AA

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