Treasury Prices and Yields Blindside the Masses – What’s Next?

Last month, 10-year yield above 3% was all the rage. Since then it has dropped more than 8%.

The April 25 Profit Radar Report commented as follows on 10-year yields:

The topic of 3%+ 10-year Treasury yields has captivated the media, and the media writes what retail investors are interested in. For example:

  • CNBC: Market is obsessed with 10-year yield
  • MarketWatch: Here’s why stock market investors are focused on a 3% 10-year yield
  • CNNMoney: Why everyone is stressing about the 10-year Treasury yield

This kind of fascination is usually reached towards the end of a trend. Commercial hedgers (smart money) are heavily betting on rising 10-year Treasury bond prices (bond prices are inversely correlated to yield, rising bond prices = falling yield).

The 10-year yield chart (TNX) doesn’t look healthy. RSI-2 is overbought, RSI-35 is diverging bearishly. This doesn’t mean TNX will have to drop tomorrow, but indicators suggest up side is very limited and down side risk elevated.”

The May 6 Profit Radar Report featured the chart below, which offers a more comprehensive look at 30-year Treasury prices (price and yield move in the opposite direction). Shown are:

  • Investor sentiment (commercial hedgers’ exposure – bottom panel)
  • Seasonality (blue chart insert at top right)
  • Elliott Wave Theory labels

The 3 most important Treasury indicators we watch (technicals, sentiment & seasonality) all suggested higher prices.

The iShares 20+ year Treasury Bond ETF (TLT) shows how this buy signal played out.

Short-term, TLT is overbought (RSI-2), and susceptible to a pullback. But, RSI-35 confirmed this rally and suggests that any pullback will be followed by more gains.

Continued updates are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

US Dollar and Euro Outlook

At the beginning of the year, the US dollar was the most despised asset of the investment universe. Headlines like the ones below were common:

  • Why it may be downhill from here for the US dollar – MarketWatch
  • USD poised for a bear market – FXStreet
  • U.S. dollar bear market: 3 reasons it can continue – SeekingAlpha

Contrary to the prevailing opinion, the Profit Radar Report was looking for a major US dollar bottom and a major euro top (the US dollar and euro move in opposite directions).

The February 15 Profit Radar Report published the chart below and stated: “Regardless of the when and where exactly the EUR/USD tops, the next major move is expected to be to the down side.”

The chart highlights technical resistance for the EUR/USD and a very bearish posture by commercial hedgers (smart money).

The EUR/USD (or euro) topped the next day, but wasn’t in a hurry to move lower.

The March 24 Profit Radar Report stated that: “Back in February cycles were not yet bullish, but that’s about to change. Smart money hedgers remain near record bullish. Although it is possible for the USD to carve out one more low (blue labels), its not required. We are looking for a significant USD rally and EUR/USD decline in 2018.

The charts below (published in the March 24 Profit Radar Report) shows a detailed US dollar Elliott Wave projection and long-term EUR/USD projection.

In addition to sentiment and Elliott Wave Theory, basic technicals showed bullish divergences at the February US dollar low, and up trend confirmation throughout the rally since.

What’s Next?

Over the coming 1 – 3 months the pace of this advance is likely to slow as the dollar carves out a small wave 4 correction and wave 5 rally, which should be followed by a larger wave 2 decline.

Once this sequence is complete, the dollar will probably rally strongly for many months, causing havoc on assets (particularly foreign US dollar denominated bonds) around the globe.

This will be a major theme and trend in the months/years to come. We do not want to miss the upcoming opportunities caused by the ripple effect of a rising dollar. As always, opportunity for some will mean risk for others.

Continued updates, along with trade recommendations, will be available via the Profit Radar Report.

ETFs that benefit from a rising dollar and falling euro include:

  • PowerShares DB US Dollar Bullish ETF (UUP) – Dollar ETF
  • ProShares UltraShort Euro ETF (EUO)
  • or short the PowerShares Euro ETF (FXE)

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Simple, Common Sense S&P 500 Update

For almost two years, investors were spoiled with low volatility and high returns, but recent market action has rattled the cage.

Will there be more ‘cage rattling!’ If so, how much?

Sometimes a simple common sense analysis is the best one. KISS.

KISS

The February 11 Profit Radar Report stated that: “For well over a year stocks have almost exclusively gone up, slow but steady. For the past two weeks, stocks have gone down quickly. What’s next? The temptation and trap is to think two dimensional – up or down – since that’s most of what we’ve experienced lately. However, stocks could also go sideways for a period of time.”

On March 27, the S&P 500 was less than 7 points away from its February 9 close. Sideways indeed.

The February 11 Profit Radar Report also provided common sense long-term context via the chart and commentary below:

1 – 2 – 3 is how we label the rally from the February 2016 low (according to Elliott Wave Theory – EWT). Wave 3 (wave 5 of wave 3 to be exact) extended much higher than normal (blue box).

Based on EWT, wave 3 is followed by wave 4, which is where we are currently at. Waves 4 are generally choppy, range-bound, long-winded, unpredictable corrections that retrace ideally 38.2% of the preceding wave 3. The 38.2% Fibonacci retracement level is at 2,536.

In terms of price, wave 4 has already reached its down side target. In terms of time, wave 4 would be unusually short.”

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

Wave 3 lasted almost 15 month (November 4, 2016 – January 26, 2018). The February ‘mini meltdown’ inflicted an 11.8% loss in only 10 days. Is a 10-day pullback commensurate to a 15-month rally? Not really!

The Conclusion (and Solution)

After looking at dozens of different indicators and patterns, the February 11 Profit Radar Report concluded as follows:

We’ve been looking to buy the dip. Is this the dip to buy? When boiling down all our indicators to a few sentences, we find that a bounce from Friday’s (February 9) low is probable. The bounce however may turn into a period of range-bound up-and-down market action, not an immediate directional up move. A path similar to 2011 (retest of original panic low). Hopefully volatility in coming days/weeks will provide a better (lower) entry.”

Find out which low-risk sector ETF the Profit Radar Report recommended on February 11.

The chart below compares the 2011 correction with the 2018 pullback (blue box). In 2011, it took 25 days before the S&P tested (and briefly exceeded) the initial panic low. A similar pattern is developing now.

Here are 3 factors to keep in mind:

  1. This wave 4 correction does not have to exceed the February low to be complete
  2. Due to the duration of the preceding rally, this wave 4 correction could last longer than in 2011
  3. In 2011, it took almost 5 months for the S&P to rally from the its low to a new high

The March 24 Profit Radar Report outlined the ideal path going forward along with target levels and an actual price projection.

Naturally we will be alert for curveballs (one of which is over the top bearish), but if the S&P 500 follows our ideal path reasonably close, it should set up a solid buying opportunity.

Continued updates and analysis is available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

S&P 500 Update: Top or Not?

The last S&P 500 update outlined why 2,500+/- has been our up side target for over a year.

Our view has been that S&P 2,500+/- is not the target for a major top, but it should lead to a 5-10% correction.

The August 7 Profit Radar Report zoomed in on 2,495 as short-term target (based on the ascending red trend line) and stated:

The S&P 500 ETF (SPY) closed at a new all-time high at the lowest volume of the year. The ideal scenario (and tempting setup to go short) would be a spike to 2,495+ followed by an intraday reversal.”

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Bussines Daily says “When Simon says, the market listens.

New Highs! Why?

On August 8, the S&P spiked to 2,490.87 and reversed lower. It initially looked like the 5-10% correction had started, but the August 13 Profit Radar Report warned that:

Odds for a bounce are high, and based on the wave structure, the likely up side target is 2,465 – 2,470. Purely based on the oversold condition however, the bounce could be stronger.”

The August 23 Profit Radar Report noted a bullish RSI divergence on the hourly chart, and stated:

Based on Elliott Wave Theory, this correction could even reach new all-time highs without violating any wave 4 guidelines. Whether this is the case remains to be seen, but it’s an option. Hourly RSI is fairly strong, therefore continued gains are easily possible.”

New Highs! Top or Not?

On Tuesday, the S&P surpassed the August 8 all-time high. In terms of Elliott Wave Theory, this high could be wave b of an ongoing wave 4 correction or wave 5 of wave 3, which would lead to the wave 4 correction (other options are possible, but those are the two most likely).

This article explains how and why Elliott Wave Theory has been such a valuable indicator.

The S&P 500 is nearing overbought, there is a bearish RSI divergence on the daily chart and seasonality is soon hitting a weak spot.

However, our reliable liquidity indicator (which has an incredible track record when it comes to sniffing out major tops) confirmed Tuesday’s new S&P highs.

Conclusion

The next inflection range spans from 2,500 – 2,540. Our working assumption is that the 5-10% correction will start then.

Our major market top indicators strongly suggests that the next correction will only be temporary and followed by new highs.

Continued analysis, with down side targets and buy/sell signals are provided via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

If you enjoy quality, hand-crafted research, >> Sign up for the FREE iSPYETF Newsletter

S&P 500 Update: Is This Rally Leg Over?

The September 5, 2016 Profit Radar Report published the chart below along with the following commentary:

The chart below shows the long-term up side target purely based on projected symmetry. Based on the 1997 – 2013 trading range, the measured up side target is S&P 2,330 – 2,485, which is in the general vicinity of the 2,290 – 2,342 Fibonacci levels mentioned in the 2016 S&P 500 Forecast. Higher targets are possible, but we’ll reassess once we get there.”

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Bussines Daily says “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

The second chart shows the trading activity over the past year along with short-term bars and trend lines we used to narrow down the up side target (the latest up side target was 2,494).

Short-term X-Ray

A special August 7 Profit Radar Report update featured this potent warning:

The S&P 500 ETF (SPY) closed at a new all-time high at the lowest volume of the year. For the first time in a while, there is a bearish divergence between the S&P 500 and the NY Composite a/d lines. The ideal scenario (and tempting setup to go short) would be a spike to 2,495+ followed by an intraday reversal.”

This is almost exactly what happened. The S&P 500 spiked as high as 2,490.87 before falling 52 points.

However, this drop quickly caused an oversold condition.

A special August 10 Profit Radar Report update featured this chart and stated that:

The CBOE equity putt call ratio (last chart) spiked to the highest reading (0.88) since April. The VIX is overbought. The VIX/VXV ratio jumped and contango fell. Both are near levels that have been seen at VIX highs. Stocks are oversold and ready to bounce. Based on the wave structure, we anticipate this bounce to be brief (2-6 days) and stay below the prior all-time highs (although the extent of the oversold condition would allow for a stronger bounce).”

Conclusion

The August 28, 2016 Profit Radar Report featured a bullish Elliott Wave Theory count with a projected up side target around S&P 2,500 (more details here: S&P 500 Update – Expect the Abnormal).

One of the images featured was a conceptual “We are here” chart (shown below). The green dots mark where we were in August 2016 (along with probability scores).

The red circles highlight where we are at today. The upcoming correction should be a choppy and frustrating wave 4 decline to be followed by another rally to new all-time highs. It then remains to be seen whether that high will be a major top or not.

Since the S&P did not quite reach our up side target, there is an alternate interpretation, which allows for continued gains almost immediately. However, that remains only an alternate unless the market tells us otherwise.

Continued analysis, with down side targets and buy/sell signals are provided via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

Long-and Short-term S&P 500 Outlook

At the same time last year, the S&P 500 was in the early stages of a 270-point drop and logged one of the worst Januaries in history.

On January 20, and February 11, the S&P was as low as 1,810. Headlines, such as the one below, sprouted up everywhere (talk about financial bloopers):

  • “Warning: The Stealth Bear Market is About to Show its Teeth” – MarketWatch
  • “Here Comes the Recession and Bear Market” – Forbes
  • “Marc Faber: Assets will Crash like Titanic” – Bloomberg
  • “Soros: It’s the 2008 Crisis all Over Again” – CNBC
  • “Gartman: It’s Definitely a Bear Market this Time” – CNBC
  • “The Bear Market in Stocks has Finally Arrived” – MarketWatch
  • “Market could Go from Bear to Worse” – TheStreet
  • What a difference a year makes.

The chart below plots the S&P 500 against six different investor sentiment gauges. Sentiment has gone from extremely bearish in January/February 2016 (green bar) to extremely bullish today.

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Bussines Daily says “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

Here is the elephant in the room: From a contrarian perspective, is investor sentiment bullish enough to cause a significant drop right now?

When viewed in isolation, the answer is: Yes. By some measures, today’s sentiment extremes rival extremes seen in late 2007 (December 31 Profit Radar Report includes a comparison between investor sentiment in 2007 and 2016).

We never rely on any one single indicator, and other indicators – which predicted this rally before it started – continue to point higher (our longer-term bullish indicators were discussed here: S&P 500 – Expect the ‘Abnormal’ – Comprehensive S&P 500 Analysis).

The S&P 500 has yet to reach the up side target published by the August 5 Profit Radar Report (see chart below).

There are times where stocks continue to climb despite sentiment extremes. Now may be such a time.

Short-term Outlook

The December 14 PRR stated that: “Yesterday’s high could be the end of wave 3 (perhaps a wave 3 within a larger wave 3), to be followed by a choppy wave 4 correction with much sideways action (sideways action following strong moves has certainly been a pattern in 2016).”

After three weeks of choppy trading, the market did what it does best. It fooled the crowd by briefly dropping below the 20-day SMA and double trend line support at 2,245.

This drop triggered another set of buy signals for the S&P 500 SPDR ETF (SPY) and Nasdaq QQQ ETF (QQQ), and the January 2 PRR stated that: “The S&P 500 broke below support at 2,245. This may just be a fakeout move. The DJIA, Russell 2000 and Nasdaq are at support. We will allow stocks to regain their footing and move higher from around current levels.”

The strongest part of this rally is behind us, but further gains are still likely. Instead of straight up, future gains will probably take the shape of ‘two steps forward, one step back.’

Continuous updates with actual buy/sell recommendation are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

If you enjoy quality, hand-crafted research, >> Sign up for the FREE iSPYETF Newsletter

Russell 2000 Delivers New All-time High with Bearish Divergence

The Russell 2000 has been on a tear. On November 28, the R2K ended a 15-day winning streak when it touched red trend line resistance at 1,349 mentioned by the Profit Radar Report.

This pullback was to be temporary. The November 30 Profit Radar Report stated that: “The R2k is nearing an oversold condition and strong support at 1,309 – 1,296,” and recommended to buy R2k at 1,305. The corresponding level for the iShares Russell 2000 ETF (IWM) was 129.90.

Now the R2K is back at trend line resistance, but this time it carved out a bearish RSI divergence. There was no such divergence on November 25, which strongly suggested new all-time highs.

Bearish RSI Divergence, a Red Flag?

Under normal conditions, this bearish RSI divergence would be a serious red flag. However, the November 13 Profit Radar Report included the following observation:

The DJIA and Russell 2000 ended the week overbought, which normally will cause a pullback. However, if the S&P is truly in a wave 3 advance, stocks will continue to plow higher without much letup.”

The Russell 2000 has plowed higher ever since. The unique condition that allows for continuous gains despite on overbought condition is discussed here: S&P 500 Update – Expect the Abnormal?

Here is another statistic in favor of higher prices: Since 1979, there’ve been 12 other times when the R2K rallied at least 12 days in a row. A month later, the R2K was higher 10 times. 3 month later, the R2k was higher 7 times. 6 months later the R2k was higher 10 times.

The chart above provides long-term context for the R2K. The red trend line going back to 2011 is obvious resistance. If (and as long as) the R2K is able to sustain a break above this line, it may just continue higher.

Until it does, some caution is warranted.

Continuous updates for the Russell 2000, S&P 500 and other asset classes are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

US Dollar: How Big is the Risk of a Triple Top?

For the third time in 2016, the US Dollar and US Dollar Index Futures are above 100, and the PowerShares DB Bullish US Dollar ETF (UUP) is near 26.

How big is the risk of a triple top?

The latest US Dollar rally is in harmony with the US Dollar projection (chart below) and US Dollar forecast published in the May 15, 2016 Profit Radar Report:

Based on Elliott Wave Theory, the strong rally from May 2014 – March 2015 looks like a wave 3. The trading range since then looks like a wave 4. Upon completion of wave 4, we anticipate a wave 5 rally to new highs. The rally to new highs may well be more choppy (at least initially) than projected.”

The US Dollar has now come within tics of new recovery highs.

There are various resistance levels at 100 – 101 along with a longer-term RSI divergence. Short-term, RSI confirmed the recent price high.

In terms of seasonality, late November/December is one of the most bearish times of the year.

As illustrated by the original projection, this rally is a fifth wave. This means that the end of this rally will be followed by a sizeable correction.

Although the US Dollar may have further up side, risk is rising.

Continuous updates for the US Dollar, EUR/USD, stocks, gold, silver and other asset classes or sectors is available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

S&P 500 and Nasdaq Reveal Priceless Clues

For the past couple of months we’ve stuck to our short-term bearish and mid-term bullish outlook (the mid-term bullishness may morph into long-term bullishness).

This means, we’ve been buying dips, but refusing to chase trade to the up side.

We got the first buyable dip on September 9. Between September 9 -13 we bought the SPDR S&P 500 ETF (SPY), iShares Russell 2000 ETF (IWM), and VelocityShares Short-term VIX ETN (XIV).

1st Tell Tale Sign

However, the September 20 Profit Radar Report warned that: “In February and June stocks produced a breadth thrust from their low. Thus far however, the S&P 500 hasn’t shown any convincing follow through to the up side. The odds of soaring without a prior test or break of the lows have diminished. We are taking some chips off the table.

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Bussines Daily says “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

Over the next few days, we sold IWM and XIV for gains of 2.33% – 14.46%. We continued to hold SPY in case stocks move higher, but closed that position at breakeven on October 4.

The chart below, initially published in the September 11 Profit Radar Report, shows the potential down side targets based on Fibonacci retracement levels.

Ultimately, the scope of this correction depends on whether stocks will retrace the gains since the February low (S&P: 1810) or June low (S&P: 1,992).

We believe the retracement will be more on the shallow side, that’s why we bought the first buyable dip in September.

2nd Tell Tale Sign

The October 2 Profit Radar Report highlighted a concerning Nasdaq constellation: “The Nasdaq-100 and QQQ ETF are near trend channel resistance, and perhaps more importantly, near Fibonacci resistance and the 2000 all-time high (RSI and Nasdaq stocks above their 50-day SMA did not confirm this high). We expect new all-time highs later this year, but if QQQ is going to take a breather, it could be around 120+/-.”

Yesterday (Monday), QQQ matched the September 22 all-time closing high at 119.48, but RSI deteriorated even further, a bearish omen.

3rd Tell Tale Sign

Although the S&P 500 was stuck in a triangle with lower highs and higher lows, internal strength was wilting (the McClellan Oscillator and Summation Index made lower lows – see bottom graphs). The chart below was published in the October 9 Profit Radar Report.

Summary

It seems like stocks want to correct further before moving higher. This correction could stop in the 2,120 – 2,100 zone, but it could also go quite a bit lower.

We will be looking to buy the dip, because a number of indicators suggest a strong rally following this correction.

When we buy, depends on the structure of the decline, bearish sentiment extremes, and whether we see bullish divergences. The Profit Radar Report already identified a beaten down low-risk value ETF and an aggressive high octane ETN with a built in safety cushion to take advantage of the year-end rally.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

S&P 500 Update

Summer was great … as long as you didn’t spend your days staring at charts, because nothing happened there.

From July 11 – September 8, stocks didn’t go anywhere. We didn’t even bother trading stocks.

But all boring periods must come to an end. The August 28 Profit Radar Report stated that:

What we are focused on for now is the most likely scope of any pullback. We prefer to see lower prices (the lower the better) and will start to leg into long positions at different levels.”

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Bussines Daily says “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

Since late July, our first buy trigger has been waiting at S&P 2,140 (=SPY 214.20). Months of patience (and not chasing the up side) paid off on September 9 when the S&P 500 dropped below 2,140.

Since buying SPY on September 9, we also bought the iShares Russell 2000 ETF (IWM) and the VelocityShares Daily Inverse VIX ETN (XIV). This article explains why shorting the VIX via XIV is such an attractive trade: The Spectacular VIX Tailwind Trade

We started to leg into various long positions because the weight of evidences suggests higher prices for the remainder of 2016.

However, although the S&P (and Russell 2000) reached our first down side target, the performance since hasn’t been too confidence inspiring. It is missing the escape velocity we saw in February and June.

In February, the S&P bottomed near 1,800 and experienced a breadth thrust (we discussed this here: 2016 Bear Market Risk is Zero Based on this Rare but Consistent Pattern).

There was also a breadth thrust right after the Brexit low in June. This kickoff rally along with two longer-term projections was detailed here: Stock Market Melt-Up Alert?

In the spirit of risk management (a bird in the hand is better than two in the bush), we trimmed our positions in XIV and IWM and cashed in some profits. Although today’s spike looks good, 2-day RSI is reaching overbought, and seasonality tends to be weak this time of year.

For now, we are happy to have bought SPY, IWM and XIV near the September lows. When stocks are up, it’s better to be long and worry about a possible relapse than being in cash (or worse short) and worry about having missed the bottom. We can now play with ‘house money.’

Continued S&P 500 updates are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

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