Monthly Archives: December 2016

Positive Money Flow Reversal on The S&P 500 Chart

Just over a month ago the S&P 500 broke above a downtrend line drawn off the highs of the previous two months, its 50 day moving average, and the next week, a zone of support that marked the all-time highs in the index. The move was initially powered by a sharp rise in Chaikin money flow. This week, however, as price momentum has moderated and the relative strength index moved out of an overbought condition, the Chaikin indicator has dropped sharply through its 21 period average to just above its centerline. This reading suggests distribution and if the index takes out the 2250 level there is little in the way of additional support until 2210.
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Is Copper the Tell on the Direction of this Market?

In late October the price of spot copper ($COPPER) began to rise in bullish divergence to the S&P 500 index. Two weeks later the broader market index joined the copper rally and since then both have moved significantly higher. Over the last two weeks, however, the price of copper has pulled back and the S&P index has continued higher. The question is: will the metal lead, again, only this time taking the S&P lower?
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Bearish Eveningstar Reversal Formation on the Russell 2000 Chart

Over the last several sessions there has been a slight divergence between the Russell 2000 and the broader market indices, and in that short time a bearish eveningstar pattern has formed on the daily iShares Russell 2000 ETF (IWM) chart.
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The pattern consists of a large “up” day candle, followed by a narrow opening and closing range “doji” candle, and completed by a large “down” day candle, and represents a bullish-to-bearish transition in trader sentiment. The index is overbought as indicated by the RSI reading and Chaikin money flow has crossed below its 21 period signal average. But like all technical patterns the eveningstar requires confirmation and in this case, a break below the steep uptrend line would be an initial step. Even if the trend line is penetrated any pullback will probably be short lived, as it would provide an entry point for those who have missed this sharp rally.