Friday, June 28, 2013

I love this chart

Below is a daily chart of the Guggenheim Solar ETF (TAN):


The chart encapsulates a long, steady decline that actually dates back to early 2011. The 50-day MA (blue line) more or less served as resistance during this protracted downtrend. Price bottomed last November at around $12 and has since more than doubled before the recent pullback.

So many bullish things in the chart, I don't know where to start:
  • The inverse head-and-shoulders (green circles). The green line at $20 represents the neckline, which was successfully breached this past February only to revert and sell-off. However, last month the neckline was broken through again, this time more meaningfully with high volume and a gap up (second time is often the charm). 
  • Note the huge reversal day this past April, abruptly halting the downtrend near the 50-day MA with a huge spike-up in volume, clearly signaling a change in sentiment. 
  • The Golden Cross in early February, with the 50-day MA rising up through the 200-day MA.
  • The 200-day MA (red line) had been heading south since 2011, but flattened out earlier this year and now is ascending.
  • Volume spikes this year have occurred for rising price periods, with volume drying up and declining when price has either retreated or consolidated sideways (see orange lines) -- bullish action that suggests ongoing accumulation. In contrast, note the orange box for early last year showing elevated volume as price steadily eroded, suggesting distribution.
  • After the fast and furious run-up from $16 to $26 in April-May, price has since undergone a healthy pullback, holding at the 50-day MA area of $22. More recently price has responded nicely, lifting off and approaching $24, further confirming the 50-day MA as solid support. 
  • Assuming this recent pullback holds, it's bullish to see the RSI remain at around 50 during this price retreat, indicating impressive momentum and confirming a change in trend from bearish to bullish.
I'll leave it at that, you get the point. A very nice chart.

Thursday, June 27, 2013

Market Update: Rally off lows but resistance nearby

The market (S&P 500) has rallied off its June 24th lows, rising from 1555 to pushing over near-term resistance of 1600 in overnight futures:


Note in the hourly chart what looks to be an inverse head-and-shoulders pattern, a bullish sign, but again it's within a very compressed time frame.

Referring to the daily chart, overhead resistance is more apparent:


The S&P 500 Index has staged a reflex-rally from the abrupt declines suffered over the last few days -- a common price reaction. The 50-day moving average has served as support during the YTD market advance and with the June 19th sell-off, the rising trend (as represented by the 50-day MA) was broken. This recent rally has put the S&P 500 within about five points of the 50-day MA of 1620; all eyes will be watching to see if the Index can meaningfully get through this level. Also note the recent rally has served to fall just short of "closing the gap" as the June 19th decline exhibits a gap at around 1625, another level of resistance.

Bottom line: in the short-term, it's not surprising to see this market rally off oversold levels, a fairly typical TA occurrence. However, as discussed, the 1620-1625 range poses as significant resistance and it will be interesting to see if the Index can successfully break through this price area (and mind you, not just poke through, but get well beyond 1625). If not and the Index rolls over, next stop could be 1550. Stay tuned.

Tuesday, June 25, 2013

Defensive sectors shining of late

Since the market selloff on June 19th, defensive sectors have been doing their thing, hanging in there quite well on a relative basis.


The S&P 500 is off about 5% from its peak last month with the bulk of the loss coming in just the last few days (since June 19). I've been on the sidelines for several weeks now, expecting a correction, and the pullback has been a healthy one until more recently. For me to get more constructive on the market, one thing I want to see is the more cyclical, risk-on sectors begin to outperform. As always, I will be keeping a close eye on relative sector returns.

I will say that with this decline, I continue to not (yet) see signs of cataclysmic danger. Yes, I am and have been concerned, letting prudence dictate my actions. However, I wouldn't describe my tone or bias as five-alarm bearish. The indicators and charts I track simply haven't conveyed anything warranting such a dire posture. Not yet anyway.

As an example, the chart below shows high-yield "junk" bonds vs. the TLT, with the S&P 500 Index in the upper inset:


The relative performance of high-yield bonds vs. TLT is another risk-on/risk-off surrogate, with a rising relative line inferring risk-on or heightened investor appetite for risk (bullish for stock market). Note that in the past the relative performance of junk bonds vs. TLT has tended to put in a top before that of the S&P 500 Index, creating a negative divergence. However, currently we're seeing quite the opposite as the Index peaked in May and has been in decline, whereas the HYG:TLT relative line recently hit a higher high, exhibiting no signs of a bearish divergence.

The weight of the evidence could change quickly in this environment, understood. But as of today, this market pullback has been overdue and remains just concerning, not (yet) hair-raising.

Monday, June 24, 2013

Not surprisingly, the Loonie remains weak

As with most investment vehicles, the Canadian dollar (CAD) -- otherwise known as the Loonie -- has declined precipitously since June 19th, continuing a trend that has been in place for many months.

The CAD hourly chart shows the breakdown from support on June 19th followed by the near-uninterrupted descent:


The daily chart illustrates the downtrend in place since last September and the recent break in support at 0.96:


The weekly chart displays the long, gradual rise and roll over of the CAD, starting back in 2009:


Note the downtrend actually spans beyond 2012 back to 2011, and also note the recent breach of the longer-term rising trend line.

The CAD's continued weakness is not surprising since all you need to do is refer to the price action of gold and commodities in general. The chart below plots the CAD (red line), gold (green line) and the Reuters-CRB Index (blue line).


Clearly there exists a very positive relationship between the three, one that goes back several years. The rolling 50-week correlation between the CAD and commodities index (CCI) has remained above zero for almost all time periods, and most often well above zero. This strong positive correlation makes sense since the bulk of Canadian equities are natural resource or commodity-related.

I've been bullish on the US dollar (USD) for some time as it has remained in a nice, fairly well-defined uptrend since late 2011:

As long as the USD remains strong, it will continue to reflect a bearish environment for the CAD and commodities. I've shown in the past the long-term chart of the USD versus commodities, clearly a negative relationship, and not surprisingly the same holds true for the CAD vs. USD:


Friday, June 21, 2013

Market Update: Correction no longer a healthy one

Within a matter of just two days, the S&P 500 has gone from approaching 1650 as it pushed the upper limits of its short-term trading range of 1600-1640, to abruptly plunging by about 70 points, breaking down through the 1600 support level and bottoming near 1580.

Source: Finviz

The hourly futures chart above shows during overnight hours the Index has undergone a reflex-rally back to prior support at 1600, a very common price reaction after a breakdown. Typically such a bounce-back rally fails at the prior support area -- which is now resistance -- and rolls over. 

Where is the next level of support?

Based on the daily chart above, support for the Index now resides in the 1550-1570 range. Also, note the breakdown in the ascending trend line.

I also wanted to point out some similarities between the weekly gold chart discussed here yesterday and the S&P 500's daily chart below.

There is the bullish breakout at the start of this year, the rally into April which then kicked into another gear with a somewhat parabolic rise beyond 1650, followed by a reversal and correction, and more recently a failed run at prior highs (see red circle, a common post-parabolic occurrence) and finally yesterday's breakdown. Much like the weekly gold chart, all pretty classic technical analysis price behavior, as if lifted from the pages of a TA textbook.

The bottom line: the market is now in bearish mode.

Thursday, June 20, 2013

Gold is broken, again

On April 17th, I posted a blog entry entitled, "Gold is broken." Well, based on the overnight gold futures, gold is broken, again.

I wrote last Friday that gold was approaching a key inflection point, as it was forming a triangle and its apex was near complete. Although it appeared as if there was slight positive divergences occurring in the RSI and MACD, I concluded by writing, "As is always the case, price will ultimately shape my opinion." And as you can see with the hourly futures chart below, price has spoken and it's quite bearish.

The daily chart gives a better perspective:


Clearly we're seeing gold break down -- again. Yesterday Bernanke hinted at easing up on easing (QE) and it spooked markets, gold in particular. Yes, more of the fear-inducing "tapering off" verbiage.

The weekly chart of gold is something to see as it has played out in near-classic technical analysis fashion:


There's the bullish breakout of an ascending triangle in the 2H of 2009, followed by a rally into the 2H of 2011, cresting with a parabolic rise to just shy of 1900, then an abrupt reversal followed by a bearish break through the rising trend line in early 2012, then another run at the prior high in 2H of 2012 only to fail near 1800 (classic post-parabolic action), then the break down earlier this year -- and now another break down. Wow, textbook stuff.

On April 23rd, I posted an entry entitled, "Is Gold Following Expected Inflation," and showed gold's relationship to expected inflation as represented by the 5yr5yr forward breakeven rate. There appeared to be a high correlation between the two and I wrote then, "Judging from history, as long as this 5yr5yr inflation trend remains down or declining, it's not good for gold."
As you can see in the chart below, and undoubtedly much to Bernanke's dismay, the trend for expected inflation has remained down.

 Source: Bloomberg

What I continue to find interesting is what I further wrote on April 23rd:
I have to think Bernanke is keeping a close eye on this 5yr5yr inflation chart, definitely preferring that expected inflation reverts back to the 3% level -- which would be bullish for gold. But -- and it's a big "but" -- expected inflation had been declining since late January in conjunction with Fed balance sheet expansion going through the roof. Question: can the Fed do enough to get expected inflation back to the 3% level, or is it pushing on a string?
Here's the current chart for the Fed's balance sheet:

Source: Bloomberg

The growth in the Fed's balance sheet has continued unabated, and yet expected inflation continues to decline. I ask again, is "Helicopter Ben" out of bullets, i.e. pushing on the proverbial string?

Tuesday, June 18, 2013

Market Update: It continues to look like a healthy correction

Last Thursday I wrote, "the S&P 500 could be carving out a trading range within 1600 and 1640. It is premature, admittedly, but early indications are 1600 is fairly firm support and 1640 looks to be the new resistance area."

Based on the hourly chart below, it certainly appears as if 1600-1640 has become the trading range for the S&P 500:


Note that this correction continues to look healthy. The chart above depicts a double-bottom ("W") formation, typically a bullish occurrence.

Stepping back further, the S&P 500 daily chart also continues to look bullish:


As it has in the recent past, the 50-day moving average (blue line) appears to be firm support. Note the recent bullish breakout through the declining trend line. Also, both the MACD histogram and stochastic are rising off oversold levels and it's good to see the MACD lines have stayed above the zero threshold (bullish). Finally, the RSI has remained at or close to 50 during this correction, inferring positive momentum remains intact and no severe or lasting technical damage has occurred with this decline -- another bullish indication.

As I've been writing, so far so good regarding this correction....

Monday, June 17, 2013

Crude oil continues to look bullish

I have been bullish on crude oil for some time now. Since starting this blog in March, amongst the initial postings was an entry bluntly entitled, "Bullish Crude Oil Chart." And I've since written about how in my experience equities tend to lead their associated commodity. Given energy equities have been doing quite well, my expectation has been that crude oil will likewise do well.

The hourly chart below shows crude oil since I last posted on this subject in late May and earlier this month:


Price has remained in a solid uptrend, along the way undergoing periodic breakouts and retrenchments to the trend line -- very common and healthy action. Currently WTI is a bit extended in the short-term at $98 and change; another retrace is likely.

The daily chart also depicts a bullish picture:


With this recent rally, crude has successfully broken out of a triangle formation.  $100 looks to be an area of potential resistance given it approximates last September's prior high and is also a nice round number (don't dismiss the importance of round numbers, review behavioral finance studies). Again, it wouldn't surprise me to see a pullback take place soon before a run at new highs occurs.

Friday, June 14, 2013

Gold is approaching a key inflection point

I last wrote about gold a month ago. Then I discussed how gold appeared to be following "the script," undergoing fairly typical price action following a severe sell-off. I concluded, "The price of gold should hold above the prior low level of approximately 1350 for the chart to remain constructive. It should build a base within this 1350-1400 range before looking to resume its ascent. However, if gold breaches the 1350 level and hits new lows, all bets are off as the next level off support appears to be around 1200."

Referring to the daily chart below, gold has indeed held above 1350 and has more or less been basing between 1350-1400 since mid-May.


More importantly, as shown in the chart above, gold is creating a triangle formation with its apex coming fairly soon. It's not quite a descending triangle since the triangle's lower line is not horizontal, thus forming a right triangle, but rather is rising even if just moderately. 

A breakout of this triangle should dictate price direction for the near future, but which way will gold break, up or down? Good question. Triangles are most often regarded as continuation patterns, meaning their eventual breakouts typically confirm the existing trend, and in this case one could argue gold's trend is down (pending on your time frame: short-term is down, but longer-term is still up).

That said I wanted to point out what appears to be a developing bullish divergence. Gold's price has been making higher lows since its low of about 1325 (intra-day) in mid-April, bottoming at around 1360 last month and currently looking to hold at the 1375 level. However, in looking at those lows, one can also just make a rough horizontal line that cuts across the 1365-1375 range since that third week in April. So you have a rough straight-across price line depicting lows, and yet note the RSI and MACD have been clearly rising in that time, setting up what can be considered a bullish divergence. I realize I've done a tad bit of massaging in this exercise, but I don't think it's excessive and very often in technical analysis perfection becomes the enemy of good.

As is always the case, price will ultimately shape my opinion. If the eventual triangle breakout is up, and meaningfully so, that would be bullish near-term. And vice versa for a breakout down, it would be bearish near-term. Stay tuned.

Thursday, June 13, 2013

Market Update: S&P 500 in short-term trading range

Last Wednesday, the morning of June 5th, I wrote, "I expect this recent correction to be short-lived, with the market most likely regrouping at the 1600-1620 level before making another run at prior highs." And the next day I wrote, "there are now enough price points to draw a lower-boundary declining trend line (blue) which indicates 1600 as support -- further confirming that round number that was arrived at due to 1) April's prior highs, and 2) the 50-day MA is approximately at 1600."

The S&P 500 did put in a bottom at 1600 on June 6th and rallied to about 1645 before rolling over.


The Index retreated all the way back to prior support at 1600 and is now attempting another rally. As shown in the hourly chart above, the S&P 500 could be carving out a trading range within 1600 and 1640. It is premature, admittedly, but early indications are 1600 is fairly firm support and 1640 looks to be the new resistance area.

If in fact the market (S&P 500) were to trade sideways within this 1600-1640 range, it would be a bullish occurrence and further bolster odds that this recent correction remains a healthy one. Better for the prior months of gains to get digested via traversing sideways then to correct with a more severe decline in prices. That said, as I wrote on June 6th, "1600 needs to hold in a meaningful way (meaning dips to 1598 or even 1595 are OK, often just shake-out moves). If 1600 is broken beyond just a minor, brief dip, my tune will almost certainly change."

Wednesday, June 12, 2013

How have technology stocks been doing?

In general, how have tech stocks been performing? As is always the case, much of the answer depends on your reference point.

Below I show the very popular Technology SPDR (XLK), both absolute and relative performance:


Wow, quite a difference in the two charts. The absolute performance of the XLK (upper inset) has remained in a nice uptrend since late last year. However, XLK's relative performance vs. the S&P 500 depicts a much more bearish picture, with relative return breaking down late last year and only recently successfully breaking through the declining trend line. Note also that relative return was able to break out in July 2011, long before absolute return was able to do so in January 2012. For me, relative return is the primary focus since I am expected to beat benchmarks.

Another way of viewing the tech sector -- or any sector for that matter -- is my preferred method, by using an equal-weighted ETF as opposed to market-weighted. The XLK is market-weighted meaning it's a top-heavy representation with larger-cap stocks having a greater influence on the ETF's return. An example of an equal-weighted sector representation is RYT, the Guggenheim Equal-Weight Technology ETF. The two ETFs have a similar number of holdings, the XLK with 77 stocks and the RYT with 71. However, as shown below, the top-10 stocks in the XLK comprise a whopping 63% of its weight, compared to the RYT with its top-10 holdings making up just 18% of its weight.


The RYT being equal-weighted is a much flatter surrogate and in my opinion offers a truer depiction of how the entire tech sector is performing. 

Below I show the relative return (vs. S&P 500) of both the XLK and RYT.

As with the absolute vs. relative charts for the XLK, the relative return charts above are quite different. We've already discussed the relative return of the XLK (upper inset), with its multi-month downtrend recently broken to the upside. Yet consider the relative return of the RYT (lower inset), making a double-bottom last year, successfully breaking through its declining trend line last December, remaining in a solid uptrend and breaking out last month. 

So again, how have tech stocks been doing? Based on the XLK, up until the last few weeks, relative performance vs. the S&P 500 has been very poor for months. However, when considering the RYT, relative returns have been much better, with a low put in last November and a rising trend established since that time. All in all, I would say tech stocks have overall been performing quite nicely and prospects continue to look bullish.

Tuesday, June 11, 2013

A chart that keeps me up at night

Loyal readers of this blog know that I'm an avid follower of divergences. I realize there is a lag problem as they can develop over many weeks and months, making for a less-than-precise timing tool. One has to use other indicators to help nail down timing calls. Nonetheless, it's been my experience that divergences can often give ample warning for turning points and more often than not ignoring their potential implications is regretful.

The chart below shows the relative performance of the Morgan Stanley Cyclical Index versus Consumer Staples SPDR (XLP), and the S&P 500 (red line), going all the way back to 1999:

Source: Bloomberg

The relative return of cyclicals versus staples typically serves as a good surrogate for risk-on/risk-off, i.e. the risk appetite of investors. When the relative return line is rising, investors are more risk-seeking and it's bullish for the market; when the relative return line is declining, investors are increasingly risk averse and it's bearish for the market. 

As you can see in the chart, over time the relative return of cyclicals versus staples tends to track the S&P 500. Higher highs in the market (S&P 500) are usually met with higher highs in the cyclicals/staples relative return line, and vice verse regarding lows. In other words, confirmation is the norm.

However, there are times when the two diverge. I identify in the chart a few such occasions with orange lines. In 2000, the relative return line made lower highs as the S&P 500 climbed higher. In 2002-2003, the relative return line made higher lows as the S&P 500 made a lower low. In 2007, the relative return line made a lower high as the S&P 500 made a higher high. These divergences occurred around key market turning points.

Fast forward to our current situation. The S&P 500 is at news highs and yet the relative return line remains within a 2-year downtrend -- not good. 

Again, I fully appreciate that divergences can lag, but the longer they remain in place the more powerful the eventual outcome. Divergences can disappear with the gap gradually closing, thus negating its implication. But the longer the divergence remains in place, the more difficult to erase as there is too much ground to make up. 

To eliminate the divergence in this case, cyclicals have a long way to go by way of outperforming staples. A long way.

Friday, June 7, 2013

Crude oil developing massive triangle formation

Crude oil's weekly chart shows a fairly well-defined, colossal triangle formation:


What's interesting is after about five years in the making, the formation of the triangle's apex is near complete, meaning we will soon observe a breakout. As I've written recently, my expectation has been for crude oil to break higher from here given that energy equities have been performing well and in my experience equities tend to lead their associated commodity. 

The weekly chart of the Guggenheim S&P 500 Equal-Weight Energy ETF looks bullish to me:


The ETF successfully broke out of a developing triangle earlier this year, and more recently has broken out again. Price has since retreated to the breakout level -- a fairly common and often healthy occurrence -- with $72 serving as support.

The above is an absolute price chart. How does RYE look relative to the market?


The chart above is RYE vs. the equal-weight S&P 500 ETF (RSP) and as with the absolute chart, it appears bullish to me. Relative performance recently broke out of a triangle and ever since has been trending higher.

All in all, a bullish outlook for energy equities tends to be bullish for crude oil. Stay tuned.

Thursday, June 6, 2013

Update on Eurozone: Equities versus Economy

It's been awhile since I first commented on the divergence between equities and economic conditions in the Eurozone. To be exact, it was March 25th, but I offered follow-up commentary on April 2nd and April 26th. I figured it was time to do another update.

Since March 25th, the Citigroup Economic Surprise Index (CESI) for Eurozone has declined from 10.9 to its current value of -53.2, or a sizable -64.1 point drop in that time. Meanwhile, equities as represented by the Euro STOXX 50 Index have appreciated by 4.6% in that period. In other words, the divergence has expanded since I first wrote about it.

The chart below helps to make it quite clear.

Source: Bloomberg

Just weeks ago, the CESI hit a low and yet around that same time the Euro STOXX 50 was making a new 52-week high. I would definitely call that a divergence (!). Granted, more recently the CESI has been trending up, but it has a ways to go to establish a meaningful uptrend and until then this move is too brief to conclude anything for certain. A similar divergence developed in early 2011 and it did not turn out well for equities -- we'll see what happens this time around.

I would add that a similar divergence has emerged for the U.S., with the S&P 500 reaching new highs as the CESI has been in a protracted downtrend:

 Source: Bloomberg

The chart above shows divergences occurring in 2011 and in early 2012 and in both cases equities eventually gave way. As with the Eurozone, we'll see if the same happens this time around....

Market Update: S&P 500 breaks to next level of support

A quick update to yesterday's comments. Then I wrote that 1620 was near-term support followed by 1600, and I expected this correction to hold within that 1600-1620 range. Viewing the hourly chart, it didn't take long for 1620 to get breached and the index is currently hovering between 1600-1620 at 1608.


Note the extended downward trend line (red) from the preexisting triangle formation now indicates upper resistance at 1630, no longer 1640. And there are now enough price points to draw a lower-boundary declining trend line (blue) which indicates 1600 as support -- further confirming that round number that was arrived at due to 1) April's prior highs, and 2) the 50-day MA is approximately at 1600.

As I wrote yesterday, "for now, this market correction remains a healthy one," however 1600 needs to hold in a meaningful way (meaning dips to 1598 or even 1595 are OK, often just shake-out moves). If 1600 is broken beyond just a minor, brief dip, my tune will almost certainly change.

Wednesday, June 5, 2013

Market Update: Near-term correction continues....

Over the last few weeks, I've been writing about an expected correction in the market. I would say at this point it would appear that equities are clearly in corrective mode. 

On Monday, when I last commented on the hourly S&P 500 chart, the index had broken down through the triangle formation and was attempting an anemic, reflex-rally back to new resistance at the 1640-1645 level. As you can see in the updated chart below, the S&P 500 was able to climb back almost exactly to that level, which coincides with the triangle's downward trend line. 


The index then immediately rolled over once hitting the trend line and now resides at 1624. Since the peak on May 22nd, the S&P 500 has made lower highs four times by my count, not something one would consider bullish. Near-term support looks to be 1620.

Viewing the daily chart below, you can see that approaching 1680 the S&P 500 was quite extended from its 50-day moving average. It has since closed at least half of that gap.


After support at 1620, in the chart above it's much easier to see next support at 1600, which is the approximate level of prior highs in April and also the approximate value of the 50-day MA. 

Overall, the S&P 500's daily chart continues to look bullish. The stochastic is now oversold and I would expect any further weakness to be contained in the 1600-1620 range.

With regards to the stochastic, note that prior to its recent decline it enjoyed several consecutive days traversing at an extreme overbought level (see red rectangle). When this happens, the stochastic remaining at an extreme overbought level for many consecutive days, it's a very bullish occurrence. For lack of a better term, I call this "good overbought" (bullish overbought?). More often than not when the stochastic oscillator hits overbought levels, it indicates the move is extended and likely running out of steam, i.e. bearish. But when it remains elevated consistently for days, the stochastic is indicating impressive momentum has occurred and built up, meaning there is thrust that tends to have carry-through, enabling price to have forward trajectory even beyond an initial correction. Note that "good overbought" occurred for most of January. And I would add that all of this tends to hold true on the flip side, i.e. there is "bad oversold" (extreme oversold momentum + duration).

It's for this reason ("good overbought") coupled with the overall bullish daily chart that I expect this recent correction to be short-lived, with the market most likely regrouping at the 1600-1620 level before making another run at prior highs. In short: for now, this market correction remains a healthy one.

Monday, June 3, 2013

UPDATE: Energy Stocks vs. Commodity

Regarding Friday's blog entry where I discussed energy equities versus the respective commodity, I used WTI to represent crude oil. I did receive more than a few emails advising that I should instead use Brent, in so doing the chart could look different. Agreed and I went ahead and updated the chart swapping out WTI for Brent.


Looks very similar to my WTI vs. RYE chart. My prior comments stand.

Market Update: S&P 500 breaks down through triangle

I've been writing almost daily about the developing triangle formation in the hourly S&P 500 chart. On Friday I wrote, "we are definitely at a key inflection point with the eventual breakout from the triangle formation likely dictating the market's future direction." Well, it appears as if the eventual breakout was down.


The hourly futures chart above shows the S&P 500 plunging down through the lower boundary of the triangle formation, with a recovery rally occurring in the last several hours.

As per the technical truism "what was support becomes resistance," the 1640-1645 level has become new resistance for the index. Again, as I've repeated more than once in recent past postings, given we're using hourly charts the focus is short-term. Longer-term repercussions could eventually stem from these shorter-term observations, but the point being I do not wish to overstate what we're discussing here in the short-term. Let's not get ahead of ourselves. 

But as I wrote on Friday, clearly this breakdown in the triangle formation has implications for S&P 500 direction over the next several days or even weeks, i.e. it does not bode well for the market near-term.