As we watched the markets fall for the second day in a row, the question is whether we have hit the top or not? Here are two charts for you of the S&P 500 that should help shed some light on the subject.
Click to Enlarge
On this chart I have pointed out the weakness we have seen over the last two days. The action hasn’t been incredibly scary, but it has hinted that our rally might be at an end.
The reason the move isn’t too terrible is because the markets have shifted around 1% each day on below-average volume. The volume did pick up compared to recent volume, but for such big moves, we want to see the volume increase to match.
The biggest issue I have with this move is that today’s drop points out that yesterday’s move was full of selling and that supply has entered the market.
Here is another bit of analysis on the S&P chart:
Click to Enlarge
The point of this chart is to point out that so far, we have only had one major day of distribution. Every other high volume down day is followed by an up bar so you know that there was demand in the mix. Until we see another day or two like this one, I wouldn’t expect the market to fall too hard.
The important thing is that we are aware of the weakness and act accordingly. I think it is a great time to take some profits and maybe even add a short ETF to the portfolio.
You also might enjoy:
About Author
