Yet Another Bear Flag
While SPY made a bullish, inverted head-and-shoulders reversal pattern on its intra-day chart after the FOMC announcement on Wednesday and may rally a bit on Thursday, its daily chart is starting to look like another bear flag. SPY had a high-volume drop on Monday, and a sharp, but low-volume retracement Tuesday and Wednesday. That’s a classic bear flag. If SPY is unable to surpass Wednesday’s high, the next leg of the bear flag projects down to the May 4th gap at 87.89.
QQQQ, IWM, XLF, and ES all have the same pattern, and DIA may already be leading the way down. The XME popped back above the neckline of its head-and-shoulders top, but did so on light volume.
The market needs to rally on strong volume immediately; otherwise the SPX has another 20 points of downside coming soon.
Losers
The top four weakest sectors since the June 11th peak are: XME, XLE, XLB, and XLI.
Ant Stampede
Wednesday morning, breadth on the NYSE hit a peak of +2100. That’s a lot of stocks being up. You don’t get breadth like that every day. In fact, the last time was June 1st – a day when the SPX was up 24 points. And the SPX was up only 6 points on Wednesday? That’s a major bearish divergence. The market may not be able to generate breadth like that again for another three weeks. When you get that many stocks rallying, you have to put some points on the board, and the market failed miserably. Lots of stocks were up, but not by very much; sort of like a raging stampede of ants. Yes, there are a lot of them, and they are coming at you hard, but they are easily squished nonetheless.
