2021-05-18: State of the Market

The market has reacted as predicted last week. Both VTI and SPY found a support level at their 50 SMA while QQQ and IWM found resistance at their 50 SMAs.

For those looking to enter long in the market we see a turn to the up side in the Market Internals indicator (that follows the Put-Call ratio market internal signal). This turn also comes at a healthy low level which could be an early signal that traders are positioning long themselves in the market. Let’s wait for price confirmation in the form of a cross over ALMA MA(white line in the chart) in the SPY for example, before we can be sure of a high probability long entry.

The QQQ could be starting to slow down and even reverse the fall as indicated by the Efficiency Ratio reading which is currently near previous lower lows before the market reversed. Still I would rather wait for price to cross the 50 SMA level. Actually this price breakout could be the signal to enter long anywhere in the main market. We know that these days NASDAQ stocks can drag others either up or down. So is worth moving along with the NASDAQ for our positions.

Finally the VIX is showing us as well readings in the vicinity of previous highs where the volatility eased and the market raised.

As a quick summary, I think that the market hiccup is over or almost over, if nothing extraordinary happens (I’m looking at you Indian Covid strain…)

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