Tuesday, May 27, 2014

ImageImageWith interest rates in US Treasuries already low, the search for yield is evident in junk bonds or high yield bonds. One representative is the SPDR High Yield Bond ETF (JNK). From the selloff back in May of 2013, JNK recovered all of the lost gains and is close to breaking the highs made a year ago. But there are warning signs through a pair of confluent price exhaustion factors. The daily TD Sell Setup for the JNK recorded a “9” on May 14th and currently biding time. The weekly JNK can achieve a TD Sell Countdown “13” this Friday with a high of at least 41.53 and a close above 41.43. Should JNK “work off” the TD signals, and break out from the one year highs, risk appetite for equities should also continue.

The SPX broke out from the 1900 level from the last trading session last Friday. The next major inflection points come in next week, about when the ECB meets and the US employment release. 


Flip to neutral if SPX closes below 1892.53.

ImageLast Friday, the 4 hour SPX did record a TD Combo Sell @13 but it carries less weight since it is not competing with TD Sell Countdown, which recorded a “13” back in May 13, 2014. If SPX does suffer a setback, then TD Combo Sell will carry over to compete with TD Sell Setup, and as long as 1892.53 holds by the end of the day, it will mark a short term exhaustion point starting at the end of day. Otherwise, other market forces should make the 4 hour TD Combo Sell a non-event. 


Bearish if SPX closes below 1872.83.

ImageWith the breakout above SPX 1900, the TTM_Squeeze can signal a lot of fuel for the upside, not so much natural buying, but by short covering.


On May 30th, change to bearish if weekly SPX closes below 1881.14, or change to bullish if weekly SPX registers a TD Combo Sell by closing above 1902.17.

ImageImageImageImageRECENT: Both weekly SPX TD Sell Countdown and TD Combo Sell recorded “13’s” on May 2nd, indicating a solid warning signal of price exhaustion. However, both the RUT and the Nasdaq price flipped bullish. 

CURRENT: Using the RUT as the primary barometer, the RUT had a “perfected” TD Buy Setup @9, but since last week’s close was higher than the preceding fourth bar at 1123.03, the RUT had switched to a TD Sell Setup. The up close on the SPX is setting up the early stages of the DeMark counts recycling higher. The Nasdaq can record a TD Sell Countdown @13 this week with a trade at/above 4197.58 this week. 

PROGNOSTICATION: Still no correction, but with the bullish price flips for the RUT and Nasdaq, and the SPX TTM_Squeeze guiding the momentum higher, the bulls get the benefit of the doubt. 


Flip to neutral if the SPX does not trade above 1897.28 during the month of May and closes below 1836.27 on May 30th, the 8 month MA. Alternatively, flip to neutral if SPX closes below 1782.59 on May 30th (updated May 5th).




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