A possible “Three Drives to Top” that started back in March is still on the table. This pattern has a downside target to where the pattern began which is near the 230 level (2300 on the SPX) on the SPY. Volume has been picking up on the down days showing energy is to the downside. Monday July 3 the Equity Put/Call (CPCE) closed at .55. Readings .55 and less predict the market will be lower 88% of the time in the next 3 to 5 days with an average loss of .8%. Topping formation is still in play. Short SPX on 6/26/17 at 2439.07.
The pattern that appears to be forming since early June is a Head and Shoulders top, where the Head is the June 19 high and the SPY is working on completing the Right Shoulder. The volume has been picking up on the days showing energy is to the downside and a bearish sign. The bottom window is the VIX with its Bollinger band. The Mid Bollinger band has been rising since mid June and another bearish sign. The Tick and TRIN combination has not shown panic yet which is what happens near a low in the market, suggesting the market has not reached a bottom yet. So far the picture remains bearish.
The bottom window is the GDX/GLD ratio which made a higher low as GDX made a lower low compared to the mid June low and a bullish divergence. Next window up is the Up down Volume percent indicator which also made a higher low as GDX made a lower low. Third window up from the bottom is the Advance/Decline Percent indicators which also made a higher low and a bullish divergence. These divergences suggest a bounce in GDX is possible in the coming days, whether the bounce turns into a trending advance, we will have to wait and see. A lot of the time, the timeframes around holidays (yesterday’s July 4) produces reversals in the market. Long GDX on 6/22/17 at 22.36.
