Stocks closed mixed today and gold was off slightly. The biggest winner today was the Nasdaq/QQQQ. The blue horizontal line on the chart above shows a breakout of the last high made on July 19th. I was looking for a possible short in the Qs if the double stochastic turned down to confirm the downturn in momentum, and if prices traded below the three day pivot. Neither has occured yet. It is still possible that this breakout could fail, but if so I’ll return to looking at the SPY for short trades. There was slight hesitation at that previous high point, and my usual very short term momentum indicator did turn down, but unless there is very clear divergence I need the double stochastic to confirm. I was out of town for a few days, so I couldn’t update. As long as the breakout above the blue line holds, this market should work higher.
The above chart shows the spread between the SPY and the QQQQ. As long as the blue line is above the red line, I assume the Qs to be the stronger market and will trade the long signals, and will only trade the SPY from the short side on sell signals. For a few days on the right side of this chart you can see the blue line dipped below the red line, showing the Qs to be a bit weaker than the SPY, so in that case I would look to short the Qs if a signal occured. Hope that clears up why I sometimes say I’ll only trade the Qs from the long side and will look at the SPY from the short side. This is simply a spread between the two markets with a moving average line as a signal.
The SPY etf shows a bit of a weaker technical picture over the last week or so. Prices are trading under the three day pivot, and momentum is still down. The long term regression channel is pointing down, and prices hit the upper error band with an indecision bar followed by three down candles. Today the low found support on the regression curve, and is forming what looks like a possible bull flag. This looks like a normal retracement of the last upleg, so as long as the low on the regression curve holds it looks likely momentum could turn back up and another leg up could result.