Hi Everyone
Ok, we have some divergence with the markets looking bullish (with nice bull flags forming) but the OVI having turned down on the S&P and the Nasdaq.
Let’s put this in context. If you look at the charts you’ll see that the indices have been rangebound since late May. We’re at an area of resistance and what the OVI is showing us is that the pros are hedging their bets. It’s far from the ringing endorsement we’d expect in a strong bullish market. In summary, the markets are undecided even though, across the board there are far more bull flags than bear flags.
What this means is that if you’re on the long side, you need to be vigilant. In other words, trade what you see, but have your stops pretty tight. If we change direction from this point, it could be pretty severe.
SPY OVI:
Friday’s SPY OVI chart.
Lovely looking bull flag but the OVI isn’t playing along. You can still play the flag for an upward breakout but you’ll need to be cautious. If the breakout happens and subsequently fails by reversing back into the consolidation, you’ll be best served by cutting out quickly.
S&P Index
Friday’s S&P 500 Index chart.
The S&P index itself exhibited a Doji bar on Friday having broken the resistance. This is often a precursor to a reversal.
Nasdaq OVI:
Friday’s QQQQ OVI chart.
Headline resistance from May is the next resistance point.
DOW OVI:
Friday’s DIA OVI chart.
Worth noting that normally we’d expect a much more positive OVI for the Dow after such a sustained move up. The OVI’s modesty, combined with the fact that the DIA is still in a technical Head & Shoulders pattern, suggests caution ahead for any bullish positions.
GS OVI:
Friday’s GS OVI chart.
Nice cup and handle with headline resistance from August at just over $156.22. Not much wrong with this and the OVI is just holding onto positive territory for now.
GLD OVI
Friday’s GLD OVI chart.
June’s resistance has broken and the OVI is still positive. Another consolidation would be useful if you’re not already in.
Conclusion
As before, yes the charts are looking bullish but the OVI suggests the run won’t be a monster, so if you go for it, you need to be watching.
All the best
Guy