There is nothing special to glean today from looking at charts of SPX-HILO, the McClellan summation index or TRIN.
VIX seems tame and aside from European bond yields, there are no huge divergences or activity below the surface that I can find that would indicate that a big move in either direction is imminent.
However, as we all know there are many other patterns, currents and subtle trends working in the market aside from price and volume based indicators and oscillators.
I see more than a few obvious reasons why stocks could rally into July.
Rally into earnings: This pattern plays out every quarter it seem but most people over look it. Bid tends to rise for no reason at all into earnings. This summer announcements start July 10. Nervous under-performing money managers are compelled to ‘put money to work’ in hopes of catching the next big pop with a earnings beat from their inside sources.
Holiday shortened week: Stocks tend to drift sideways or up near national holidays as big money goes on vacation and the kids / algos are left running the trading desk. This happens more often than not.
End of month and quarter ‘window dressing’: June 29 marks end of Q2 for the ‘billions under management’ crowd. I fully expect to see some rotation from the losers into the winners for Q2 statements.
European summit: Look, I know the EU prattling is useless and each new ‘reform’ or ‘solution’ or ‘lending facility’ is laughable. I know the politicians in the EU dumbshow will likely never reach any sort of agreement. But that may not stop stocks from bidding higher once they make an announcement and go on vacation for the rest of the summer. Perhaps the market is celebrating when they go on vacation, knowing they at least can’t do any more harm while away?
One of my favorite setups is developing on the daily chart on the indices and AAPL. A 9EMA/30WMA trend continuation setup (floor traders method).
The 9 EMA crossed above the 30 WMA about a week ago. Price has now closed back below the 9 EMA for two sessions and entry occurs when price has closed back above the 9 EMA with a stop a few ticks below the low bar (provided the 9 EMA doesn’t cross back below the 30 WMA). This signal is strongest during the first pullback after the MA crossover and should trigger entry or fail outright by the end of the week.
What I really like about this setup is the simplicity. It isn’t pure technical momo ‘if it is going up buy it, if it is going down sell it’ but you don’t need to worry about many complicated technicals or factors such as accumulation, distribution, OBV, upper time frames and follow-through. Two moving averages and price bars, that’s it.
Now, just so I am clear I am not ‘wildly bullish’ about stocks given the bigger picture. I fully respect that the market is in a corrective phase and even if my long signal is triggered, I don’t think we are starting a powerful move to the upside. Which is why I like selling AAPL 565/550 (or similar) put spread in this scenario with a hard stop placed at any close below the short strike.