Monthly Archives: April 2016

In March, a break above the rim line of a complex cup and handle pattern initiated a rally in the iShares Emerging Markets (EEM) ETF that took it back above its 200 day moving, and retraced 50% of the range from the May 2015 high to the January 2016 low. Unfortunately, this test has been followed by a series of bearish candles on the daily chart which suggests the fund may be in pullback mode. The RSI has been in bearish divergence to the stock price and Chaikin money flow dropped below its 21 period signal average and is sitting flat on its centerline.

A doji candle formed on the first foray into the resistance zone on the S&P 500 delineated by the horizontal highs and the downtrend drawn off the lower highs over the last year. The doji candle has a narrow opening and closing range which reflects tentative price action. I mentioned on Monday that the appearance of high wick or doji candles in the zone would be a warning sign, but that the market was oblivious to previous technical warnings. Certainly, one day of circumspect price action doesn’t mean the market is topping out, but it is does caution to be alert for further evidence of a transition in investor sentiment.

A zone of resistance is in place on the S&P 500 chart between the 2100 and 2135 levels. This area is delineated by the space between the downtrend line drawn off the lower highs of the last year and the 2015 horizontal highs. The appearance of high wick or doji candles in this zone would be a warning sign, but the rally this year has been unrelenting and clearly oblivious to any previous technical warnings.

In case you were wondering, the market is currently interpreting lower oil prices as a counterintuitive negative.
Zero Hedge is reporting that May WTI Crude is down 7% and Dow futures have dropped 100 points, following the failure of participants at the Doha conference to reach a deal.

(chart from Zero Hedge)