conflicting signals

today was a healthy day, a consolidation day … kind of a boring day … relatively flat all day.  With that said, this is pretty much the best outcome I could have hoped for given the extreme overbought levels we were (and are) at.

When markets get to extreme levels they can correct in one of two ways – through price OR through time.  Today’s price stability let off some steam preparing for a new move up.  We are not ready to go up yet, but it was really good to see that the market held strong and didn’t fall on its’ own weight.  In yesterday’s post, I was worried about an island top … which of course didn’t come.  It still can come, but good to see there wasn’t a drastic reversal.

I am seeing very conflicting signals in my analysis, which i supposed kind of makes sense based on today’s non-movement.  there is indecision as to whether the market wants to go up or down at this point.

Both the SPY and QQQ  index has some negative divergences forming on the RSI timeline, Bollinger and MACD indicators over the past week and a half.  A negative divergence forms when the indicator conflicts with prices … where prices go up and the indicators go down.  I am more of a traditional ‘price’ kind of guy that only uses indicators for confirmation or caution, since the indicators are based on price anyway but it is troubling nonetheless.  Most likely this is just a result of the momentum slowing over the past week where we are not rising as quickly off the bottoms as we had 3-4 weeks ago, but it is a caution flag nonetheless.

We still have the same resistance levels that we have to come to terms with shortly, but for now the market remains in a bullish short, intermediate and long term up trend.

have a great weekend!!