This week, the S&P 500 Index produced a bullish intermediate confirmation signal while the Dow Jones Industrial Average produced a “buy the dip” signal on its Market Forecast.
But, in the both cases, due to the maturity of the current intermediate run, there’s a good chance these patterns actually precede trend reversals instead.
The short bullish intermediate run on the Russell 2000 Index also portends upcoming weakness in equities.
This week’s Heikin Ashi candle on the S&P 500 wasn’t as bullish and it’s current close for the week is already very close to where next week’s HA candle will open – this suggests we may get a transition candle next week.
In today’s video (below), I look at prior transition candles that precede bearish runs to see what to watch for next week.
The VIX Volatility Index closed the week above 15 after previously closing below. In the past, this pattern suggests there may be more of a jump of volatility ahead towards the mid-20s.
The VIX finished the week in bearish territory relative to $VIX3MO and a close above 1.05 next week would confirm the intermediate pullback.
With the S&P 500 Index so far above its value area on its one-year Volume Profile, I talk about what the intermediate pullback might look like in best- and worst-case scenarios and where the next bounce to a new intermediate run could occur.
With bonds and gold already so technically overbought, there’s little chance we are headed for a long-term period of volatility – similar to January and October 2018. But, the expectation is that this intermediate pullback could produce a significant bullish divergence on yields at extreme lows that could actually lead stocks (and commodities) to a big run going forward.
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Stock Market Video – for week of February 24, 2019
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