01/13/2019 | by Brad Ritter

Market Update Into 1/14: January 2016 Déjà Vu?

BlogPrepare for the Trading WeekMarket Update Into 1/14: January 2016 Déjà Vu?

A prepared trader is generally 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. In this weekend’s analysis, we take a look at the broad markets’ continued strong move up this week and compare the recent lower indicator action with the early 2016 moves which aren’t exactly the same but are showing many similarities.

$SPY: Weekly Candle

$SPY weekly chart.

Written Analysis:

The recent three-week rally has moved up almost perfectly to the previous channel support now acting as a hard level of resistance above. A strong move off the 200-week simple moving average occurred as well. This mimics the January 2016 move very closely. One thing to note here is the lack of volume with the uptrend which may suggest it could be short-lived. However, this same low volume “melt-up” occurred in Q1 of 2016.
The Vortex Indicator is showing a wide divergence between the VI – and VI+ which is strikingly similar to the move in early 2016.
The MACD has taken a beating since October and the MACD has yet to see a bullish cross since. However, there are signs of a reversal as the MACD histogram is starting to reverse which is just a function of the fast (blue) moving towards the slow (yellow).
The Williams % Range has not been this oversold since January 2016 but has quickly moved out of this area and could continue to the upside as there is plenty of room left before any type of overbought conditions on this particular time frame (lower inputs on this timeframe will obviously show higher levels which could be signaling a potential reversal if this proves to just be a dead-cat bounce).

$QQQ: Weekly Candle

$QQQ weekly chart.

Written Analysis:

The price of QQQ bounced perfectly off the channel support trendline going back to 2016 with a hard move up to potentially test the 50-week exponential moving average. An alert is set on this moving average which will automatically send an email or mobile alert when the price enters into this purple area. Volume continued to decrease last week as price melted up higher.
The vortex indicator is looking very similar to the SPY setup with a wide space between the VI- and VI+ showing divergence. When the red line (VI-) starts to converge towards the blue line (VI+), this has confirmed further moves up such as in 2016.
The MACD has been crushed over the last four months with the histogram showing signs of short-term momentum to the upside. A bullish cross would potentially make this a more convincing move but could easily just be a huge bull trap as many bearish variables are still at play both nationally and globally such as the shutdown and trade wars. Europe has started seeing a slowdown in production as well.
The last time the Williams % Range was this oversold was in 2016 as the market was finding a long-term bottom. As the %R starts to move out of oversold levels, a breakout could occur with a move to the upside through -50.

$XBI: Weekly Candle

$XBI weekly chart.

Written Analysis:

XBI has seen the largest moves up out of the three ETFs analyzed this weekend. This has been the leading mover in the broad markets as this led the market to the downside in October, showed the temporary bottom in the markets on Christmas eve before the SPY or QQQ showed signs of a reversal, and now leads the markets to the upside. The 50-week exponential moving average is the area to watch above next week. We have set an alert on this line to let us know exactly when price action gets within this area.
The Vortex Indicator looks idential to how it did back in early 2016 with the VI- starting to converge towards the VI+.
The MACD is violently moving upwards shown by the decrease in the histogram which is a function of the sharp move in the blue line (MACD, fast) towards the yellow line (Signal, slow). An upside cross would confirm momentum is continuing in the bulls favor.
The Williams % Range is breaking out to new highs after this recent move up and down out of oversold conditions. However, as seen in early 2016, these steep moves up and also have steep moves down as well.

$GE: Before vs. After

This weekend’s “Before and After” shows $GE breaking through the price channel (shown by the two green lines) with an alert set on the wedge resistance above. The after picture shows the price hitting this alert area on the resistance trendline being rejected hard at this area. The price did eventually continue up as demand increased to break through this technical area.