The Ps (S&P 500) rallied but found their high by mid-day and began to work their way lower. Still, they managed to close just over ¼% higher. This action keeps them set up as a Bowtie down just after all-time highs. Not every transitional pattern like a Bowtie will turn into the mother-of-all tops, but all tops will have a transitional setup. So, now is the time to pay attention.
BTW, the Dow is also a Bowtie down after all-time highs. See last week’s Dave Landry’s The Week In Charts for more on major vs. minor Bowtie signals.
The Quack (Nasdaq) had a decent day, tacking on nearly ¾%. This action has it rallying off the bottom of its short-term trading range. It also puts it within 2% of decade plus highs. On a relative strength basis, it remains the strongest.
Although off its best levels, the Rusty (IWM) still managed to end the day nearly 1% higher. I wouldn’t get too excited here though. So far, it only appears to be pulling back in its downtrend.
Quack aside, the indices are looking quite dubious.
The sectors bounced along with the indices as you would expect. However, for the most part, this action is only setting up a plethora of sell signals.
The Financials are now set up as a Bowtie down.
There are many others that have also Bowtied down. In the “Major” sectors this includes: Chemicals, Energies, Foods, Banks, Insurance, Media, Transports, Utilities, and the Semis.
Telecom is set up as a First Thrust down and will likely also Bowtie down soon.
Other areas such as Materials & Construction, Manufacturing, Conglomerates, Tobacco, Aerospace/Defense remain in downtrends and/or are looking toppy.
So what do we do? The Quack aside, it’s looking pretty ugly out there. Therefore, continue to look for shorting opportunities. As usual though, just make sure you wait for entries. On existing positions, continue to honor your stops. Let the market take you out of the stinkers and keep you in the winners.
Best of luck with your trading!
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