Markets Standing and Ruminating
The overall picture did not change much from yesterday’s trading. Although, from a very short-term basis the trending degraded. Here is how the major markets short-term trending looks like based on the hourly charts.
Note that this is from hourly charts with the 10-period meaning 10 hourly candles and so on. On the face of it this may look like the markets are falling but that can be misleading. The hourly trending turns negative several times within a longer term (daily and weekly) bull run.
Make no mistake that we are still in a bull run. The above picture gives me an early indication that markets could be turning. But I need to see confirmation from the daily trending to conclude that we are indeed reversing the trend. I do not see that yet.
Market participants are watching whether price can overcome the overhead resistance. The higher probability expectation is that the market has run up quite a bit in a straight line and should be giving back some ground first. That is the expectation but does not mean the market will follow through with that expectation.
The market does what it does and is always right. The momentum has certainly stalled a bit, and this could be the breather that all are waiting for. After the breather, the market can move in either direction. These are the most difficult periods for trend followers.
The best option is to be on the sidelines until the market takes a defined turn in either direction. Then play the trend.
The SPX sectors are also looking good with the hourly trending looking similar to the major markets. Here is the full picture:
The XLE may be starting to move up. So, I will be watching that closely. The others are mostly similar to the SPY.