Last week the market was hitting new records as investors kept betting that the Trump camp's frequent promises of major tax cuts would boost the economy. It also added fuel to a rally that had stalled, but now appears to be back on track to higher highs.
Check this DOW candle chart [INDU] and note that from December to February this market was going mainly sideways. But then the white bull candles took control and the rally was back on. Not only that, now this rally is also supported by bullish MACD momentum bars on top of the demarcation line.
But there is a caveat. Note the bubble on top of the RSI channel which is a sign that this market has become overbought and top-heavy which could trigger a short-lived but sharp pullback.
A similar configuration is shown by the large caps [SPX.] After a two-month consolidation period this index spiked and may consolidate a bit further before trending higher
The Moving-Average lines configuration remains bullish with the red line above the green line. Also, the MACD momentum bars are solid above the demarcation line and that is bullish for the market.
But again, the RSI bubble on top of the trading channel shows this market to be overbought, top-heavy and needs to pull back before finding renewed traction to higher highs.
After consolidating since last December, the small-caps [SML] had a nice breakout to the upside and now appear to be consolidating some more. Small-caps are market leaders and should the MA line manage to cross above the green line, expect the rally to continue.
The small-caps have good support from the MACD momentum bars above the demarcation line and from the RSI strength indicator solid in its bullish territory.
The mid-caps [MDY] usually pull in tandem with the small-caps and that appears to be the case now as well. So this index looks a bit overextended and may have to pull back a bit to catch its breadth.
But between the small-caps and mid-caps this market looks pretty good.
After some consolidation this transport index [TRAN] appears to be quite bullish which reflects what's happening in the economy. The MA lines configuration is bullish with the red line above the green, the RSI strength indicator is positive in its bullish territory and so are the MACD momentum bars on top of the demarcation line.
Because this index shot up a bit too far too fast, a pullback from here has to be expected. But that would be a good thing because of renewed traction to the upside.
All components of this discretionary index [XLY] are bullish but again, this index also shot up too far too fast. So now it has to pull back to find renewed traction to the upside.
After consolidating and digesting the sharp advance of November and December the financials [XLF] are again in a consolidation mode. But now there is a pull-back ahead because the components of this index were snapping up too far too fast.
Meanwhile, the MA lines configuration came pretty close of turning bearish before the red line bounced off the green line. Although it still looks a bit iffy, but for as long as the red MA line stays above the green line, the financials should be O.K.
While the RSI strength indicator and the MACD momentum bars give solid support to the financials, a pullback from here would add to the traction to higher highs.
Every component of this tech sector [XLK] is bullish. In fact it is too bullish and this is why this green bubble appears on top of the RSI channel. It means that this sector is way overbought, top-heavy and in need of a pullback and some consolidation.
The biotech sector (NYSEARCA:XBI) has turned extremely bullish with all its components overbought, top-heavy and in need of a pullback and some consolidation.
Wall Street's fear index [VIX] keeps bouncing off the bottom and that has some market strategists concerned that this index is about to break lose and start advancing.
But for as long as the MA lines configuration stays bearish with the red line below the green and the MACD momentum bars stay subdued and close to the demarcation line, investors have nothing to fear from the VIX fear index.
Since last December the commodity index [GTX] has been floating up there, not sure if it should consolidate, nosedive or rally. The RSI strength indicator is sitting at dead-neutral and so are the MACD momentum bars.
The MA lines configuration is close to neutral also, as the red and green lines appear to be ready to merge. So if you want to know whereto with the commodity market, flip a coin.
Just like the commodity market generally, the oil index [WTIC] is mostly neutral, even though the MA lines configuration is somewhat bullish with the red line above the green and the RSI strength indicator in its bullish territory.
But the MACD momentum bars are totally comatose and that is the reason the price of oil isn't going anywhere, up or down.
The yellow metal [GOLD] had a pretty good rally going, but then it became overbought and top-heavy, which caused the wide gap between the red MA line above the green.
This shows how much the top-heavy condition for gold has grown. Yet, with the MACD momentum bars at dead neutral on the demarcation line, the price of gold isn't going anywhere.
ETF sectors: Discretionary, Technology, Financial, Health-Care, Materials;
Leveraged Bull ETFs: Semis 2x USD, Semis 3x SOXL, Materials 2x UYM, Financials 2x UYG, Financial 3x FINU, Industrials 2x UXI, DOW 2x DDM, S&P 500, 3x SPXL, Mid Caps 3x MIDU, Small Caps 2x SMLL, Tech 3x TECL, Junior Gold Miners 3x JNUG;
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Leveraged Bear ETFs: S&P 500 2x (NYSEARCA:SDS), Financials 3x (NYSEARCA:FAZ), NASDAQ 2x , Small-Caps 3x (NYSEARCA:TZA), Commodity 2x (NYSEARCA:DEE), Oil 2x (NYSEARCA:DTO), Gold-Miners 2x (NYSEARCA:DUST).
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