Testing New Highs: What’s Next?

//Testing New Highs: What’s Next?

Hawk’s Scan Sentry Report January 14, 2013

You may have read in posts past how I often compare the S&P index to the NASDAQ to try and see which market is leading which. Another good candidate for this exercise is the Russel small cap index. When the Russel leads the S&P upward this is often perceived as a ‘risk on’ market environment. As we all know, the small cap stocks represented in the Russel index are much more volatile than the S&P 500. So, when we see money flowing into this smaller cap futures contract it helps to lend credence to a rally in the S&P when the S&P itself does appear to have the breath of bullish sentiment to support it. This is the case which we see today. Let us take a look at the charts below.

Although the S&P is rising, I don’t see the buying confirmed by significant readings in the Radar1 Fear/Greed indicator. As predicted last week, the ES futures contract has now tested the September highs and run some stops; but it has neither retreated nor advanced since that probe into loftier ranges.  If the market has a ‘risk-on’ attitude we would expect to see the riskier Russel contract lead the S&P warhorse to the new highs.  When I look at the Russel futures chart today I see considerable more advancement to higher highs than in the ES contract. This indicates a ‘risk-on’ sentiment in these American markets. However, our indicators on the Russel chart show a Bearish Pivot Divergence coinciding with an overbought Trend Exhaustion 1 indication. From this I would expect to see this market slide back to retest the breakout price (Support) around 858.  Whether this price level holds up as support for the Russel contract may serve as a good harbinger for what is to come in the S&P futures market.

Index Futures:

S&P Index

(Here we see price resting just above the support level created last September. Trend Exhaustion 1 shows a recent overbought signal which is bearish. However, Radar 1 Fear/Greed has just turned bullish, albeit not significantly yet. Combine this with a bullish Triple Trender and a bullish Radar3 Trend Strength and the path of least resistance here is up. )

Russel Index

(This market started the new year making new 12 month highs, well ahead of the S&P. Notice how this market just accomplished it’s Bull Flag target and still shows a relatively strong Fear/Greed reading. However, from the bearish Pivot divergence and the Overbought Trend Exhaustion1 signal I would expect an imminent decline to retest support @ 858. ) 

I want to share with you how I am looking at several other of my favorite markets this week. On the examples below I explain my analysis for some of the most commonly traded symbols using some of the most highly regarded technical indicators available. These tools are used by both institutional and private traders across the globe and are built into many of today’s most popular trading platforms. However, if you are not familiar with these indicators please follow this link to a legend describing these tools.

Other Charts and Analysis

Equities Setups:

(Sell Short)OKE– Oneok Inc.

(Notice the combination of bearish Pullback 23 and Trend Exhaustion1 signals. As is often the case, this identifies a bearish pullback divergence with the Radar2 Price Leader. ) 

Commodities:

GOLD

(This market has more downside than upside as indicated by the Triple Trender, Radar 3 Trend Strength, and Radar1 Fear/Greed. However, $1642 will act as significant support. I expect to see this market trade in a range between $1680 and $1640. I will be looking for intra-day trading opportunities to fade those price levels. )

CRUDE OIL

(A  Bull Flag setting up which will be confirmed with a close above $93.87.  Radar3 Trend Strength and Triple Trender are both bullish as is Radar1 Fear/Greed. However, we are trading at the upper end of a recent congestion zone which should prove to be significant resistance.)

Forex:

GBPUSD

(Since the Triple Trender and Radar3 Trend Strength both synchronized  bearish we now have a pullback into the shorter term Trender giving us a short entry opportunity. If the Radar1 Fear/Greed turns green and indicates more bullishness, this short trade will be disqualified.  )

May the trend be with you,

Hawk

Jan Arps’ Traders’ Toolbox is not an investment advisory service nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Examples presented on this site are for educational purposes only.  It should not be assumed that the methods, techniques, or indicators presented in these examples will be profitable or that they will not result in losses. There is a high degree of risk in trading.  Readers using this information are solely responsible for their actions and trade at their own risk. Readers should always check with their licensed financial advisor .

2018-01-08T07:09:58+00:00January 14th, 2013|Hawk's Picks|