A prepared trader is a profitable trader, and Sunday is a great day to get ready for the week ahead by studying up from last week’s price action. This weekend, we once again focus on the broad markets as the month of October has been nothing short of bloody. As the daily candles continue to show noise, the weekly candle charts are starting to show oversold levels that have seen reversals in the past. See how the charts turned out from last weekend by clicking here.
$SPY: Daily Candle
- As the $SPY started to curl back down after a dead-cat bounce mid-week, more downside is possible to the black trendline below.
- The %R is continuing to show oversold levels after a slight bounce last week. Positive divergence would confirm the bottom here.
- The daily RSI failed to break through the weekly RSI and is now turning back down.
- The MACD is starting to curl to the upside which is showing signs this may be nearing a bottom point.
$SPY: Weekly Candle
- The daily candle is showing signs of bottoming out right near the channel support (yellow support trendline).
- The %R is showing oversold levels similar to ones in the past that have returned strong bounces afterward.
- The RSI is also showing very oversold levels which have only been seen 3 other times over the last 2 years.
- The MACD continues to move down but this is generally a lagging indicator so it will take some time to see if this is really a reversal. A MACD cross would be confirmation.
$QQQ: Daily Candle
- After a dead-cat bounce last week right near the moving average resistance above, the price has started to curl back down to possibly test the yellow support trendline below.
- The %R continues to try and move up but is showing signs of weakness. Positive divergence would confirm a short-term bottom here.
- The RSI is looking similar to the %R after just bouncing out of extremely oversold levels.
- The MACD is showing signs of a possible reversal coming as the blue (fast) is starting to curl and move towards the yellow (slow).
$QQQ: Weekly Candle
- The price is trading right at the EMA (50) with a doji close.
- The %R is getting close to oversold levels not seen since 2016 (shown by the green rectangle below the MACD).
- The RSI is very oversold similar to the %R which has shown reversals in the past after hitting these levels (shown by the green circles).
- The MACD continues to move down but is not showing any signs of curling to the upside yet.
$XBI: Daily Candle
- After a bounce last week (across the whole market), the price started to move back down starting mid-week similar to the other two ETFs above. These two trendlines below are the next areas to watch if price continues down.
- After a very quick bounce out of oversold levels, the %R is now moving back down into oversold territory.
- The RSI is also showing some noise here with oversold levels being tested once again. Watching for positive divergence to confirm a bottom.
- The MACD recently started curling to the upside last week but then reversed sharply. A bullish cross of the fast (blue) through the slow (yellow) would be a technical reversal.
$XBI: Weekly Candle
- Price ended up holding relatively well above the green support below this week but still may be tested if weakness continues into next week.
- The %R is in oversold levels only seen 3 other times in the last two years. Price has generally moved up after these oversold levels were hit.
- The RSI is also very oversold with capitulation likely this week if it has not already occurred.
- The MACD is crossing down below the zero line which has been at this level since summer of 2016.
Before and After: $GS
In this weekend’s “Before and After”, we take a look at Goldman Sachs’ price action from October 16th to October 19th. This chart was interesting due to the daily Williams %R and RSI crossing through the weekly Williams %R and RSI on the 16th. As the weekly indicators had not closed yet, the lower indicator charts look slightly different on the chart from October 19th. Check out our blog on exploring the relationship between short-term lower indicator crosses through longer-term ones here.
- The SMA (20) and EMA (50) are the first levels of resistance above if price continued to move up.
- The daily %R (25) was moving through the weekly %R (25) showing short-term momentum was picking up.
- The daily RSI (10) was moving through the weekly RSI (10) also showing short-term momentum picking up.
- The MACD is curling to the upside showing that price action is starting to reverse.
- The price broke through the SMA (20) and was rejected right at the EMA (50). The price is now trading right in between these two levels with the next levels of resistance at the yellow and purple trendlines.
- Since the first chart was taken intra-day, this updated chart will look slightly different on the lower indicators. The daily %R (25) has crossed through the weekly %R (25) and bounced right above it on Friday.
- The daily RSI (10) crossed through the weekly RSI (10) with more upside left before overbought levels are reached.
- The MACD curl materialized into a MACD bullish cross after strong volume came in the last few days.