Hi Everyone
The markets are still volatile with large daily swings up and down.
The basic patterns remain pretty bearish and the OVI for the S&P and Nasdaq are also negative, while the Dow OVI is around neutral right now.
Nasdaq QQQQ Chart:
I’m paying a lot of attention to this as the QQQQs have been pretty prescient with the OVI. When the market resumes its downtrend, Nasdaq stocks will be good to short.
S&P SPY Chart:
This broad index also has a negative OVI though this will climb if the index reclaims significantly more ground.
DOW DIA Chart:
The OVI here is just hitting the neutral line. The DOW is a much narrower index and right now I’m more inclined to agree with the OVI readings on the S&P and Nasdaq.
Remember, we must always trade what we see, but I expect the medium trend for the markets will be down for most of this year, and we’ll have a number of upward retracements (some of them steep) along the way.
This means for the main part I’ll be concentrating more towards bear flags, unless and until the market shows me something substantially different.
It’s worth noting that on May 25th, the Dow and S&P cash markets formed a significant Doji Reversal bar. Reversals can be very significant and those of you who know my Reversal Strategies will already have been able to make money from that move.
Here’s the S&P:
And here’s the DOW:
Summary:
My expectation is that we haven’t yet seen the market lows for this year. There will be plenty of opportunities for Bear Flag plays as the markets retrace upwards and form tradable bearish patterns.
If things change and we start forming beautiful bull flag patterns then of course we’ll take a view. The summer could potentially see an drift upwards as volumes tail off, but July’s earnings season should be interesting for sure.
If you don’t yet have the OVI, I would say you really should learn more about it. Click here to view a short video I prepared a couple of weeks ago.
We’re now able to SCAN for OVI set-ups on a limited number of stocks so do watch the video here to discover more.
All the best
Guy
