In 2015 momentum buy signals have failed consistently. The indexes have stayed inside a tight range. The stock market hasn’t given up profits this year to buy and hold investors or trend followers. 2015 is a range-bound market not giving bulls or bears a trend that they could trade for more than a week.
- The market continues to lack breadth with the top ten stocks in the S&P 500 up +21% and the other 490 stocks down an average of -3%. This lack of breadth has prevented the market from rallying to new highs all year, with the energy sector weighing it down.
- The loss of the 200-day in $SPY gets me shorting strength on rallies back to the 200-day, and only buying the deepest dips into oversold territory.
- The RSI near 30 next week will give a good risk/reward ratio dip buy for a trade on the long side. If we bounce here, the upside will likely be limited to the 200-day or the 50 RSI for $SPY.
- $SPY price is extended over 2% from the 10-day EMA. Price generally returns to the 10-day EMA every 5 days.
- The $NYMO is reading a rare -80, which was the same oversold level that it reached last December when the dip buying commenced for a nice rally into the new year. This increases the odds of a rally.
- The FED holds the key to the price move. We are seeing a lot of people exiting their positions and going to cash in front of the FED next week, and if rates stay the same we could see a rally off oversold conditions. That would be convenient.
- The $SPY MACD stays bearish.
- The stock market continues to be traded and not accumulated. This has been the cause of bullish chart pattern failures and momentum buy signals causing losses consistently.
- Due to the nature of the price range in 2015 momentum, signals have become short selling signals and maximum fears of a crash have been the time to buy the dip for a brief rally. Upward movement means we are going down and sharp downturns have meant we will go back up soon.
Full disclosure: I got stopped out of my long positions early last week and I have been flat with no positions. I am looking to buy the dip next week.