With $SPY down -1.1% year to date, 2015 continues to be a flat year. I don’t understand the continuous perma-bull celebrations on the rally to nowhere. Perma-bulls and buy and hold investors have likely made few returns this year.
The 70 RSI is the near term overbought resistance on the $SPY chart.
The 200 day SMA is the near term resistance level that the bulls have to take back from the bears. It may be easy to take, but holding it and trending above it will likely not be easy in this range bound and overbought environment.
A convergence of the 70 RSI and the 200 day SMA being lost after being retaken will be a high probability, short trade that I will take.
$VIX is at 15, but could be back at 12 to converge with the 70 RSI and the 200 day, leading to the odds of a short term top.
The MACD lines have diverged wildly and are due for convergence.
$SPY will likely follow $QQQ over the 200 day SMA next week, but will have to build a price base to hold it.
I am not attempting to call a near term top. I am pointing out the risk/reward shifts back in favor of bears at the 200 day resistance in $SPY, a $VIX under 15, and near the 70 RSI due to the current range bound market in 2015.
In range bound markets when the market signals are too bullish, it’s time for a pullback. When the signals are too bearish, it’s time for a rally. Signals are currently too bullish so we could see a pullback this coming week.
I will become bullish and begin to buy dips once $SPY, $IWM, and $DIA can begin to trade consistently over the 200 day SMA. I will continue to sell short until these indexes are above the 200 day.