Dark Clouds Across the Board
Shooting stars last month, this setup suggests extreme caution, relying on end of the year statistics is risky.
Technicals are overbought in multiple timeframes as presented in recent editions. The divergence studied last week for SPX in the weekly chart had immediate validation. Macro indicators present warning signals that take a time before materializing, and the charts are acting accordingly.
Last week, euphoria was in the air, all the U.S. indexes soared after the election results and rate cut news, this publication warned that the green weekly candle was technically not comparable with the recent ones observed in the weeks ending in Sep 13th, Aug 9th, Nov3rd 2023, or March17th 2023. The risk was significant for buyers at those levels.
The bearish thesis based on the right selection of indicators last week was proven true, the indicators that were screaming caution were presented in this premium publication for SPX, NDX (which indeed was rejected at a major annual resistance), DJI, IWM (a textbook example of overheated technicals); and also for stocks that were overextended like TSLA (which is following the script written a week ago), or others like GOOG that closed at an annual resistance and risk was anticipated suggesting a safer entry point when a specific level is consolidated.
Bitcoin is also moving as it has done in previous rallies illustrated last week, the time for caution has come for the cryptocurrency, and many stocks as indexes are showing dark cloud setups, hence the title of this edition.
Remember, this publication posted on August 4th (Sunday Night) the bounce that was coming while the Nikkei was crashing and also de ES Futures, this publication also anticipated the bounce on BITCOIN one week before it started, highlighting a technical event that premium subscribers read well before the rally. The bullish jumps in TSLA and GOOG were also well anticipated in an ocean of bearishness, similar bullish view for SPX in September when the “statistics and rate-cuts suggested a crash like 2007”. My objective is to guide you navigating the market, not bringing indicators that support a stubborn point of view. Since last week the market had overheated signals, let’s navigate a new one that has appeared in the landscape:
A dark cloud cover is a bearish pattern that suggests a potential reversal of an uptrend. It consists of two candlesticks, a large bullish candle, signaling a strong upward movement, and a large bearish candle, opening above the high of the previous bullish candle but closes below the midpoint of the previous candle's body.
That is a cause of concern considering the shooting star observed in October, different timeframes start to align and most importantly, the macro context is a reason to be cautious considering unemployment levels ascending, housing starts in decline, and other macro indicators that change slowly during the weeks and they’re not indicating the U.S. economy is far from a recession, on the contrary the macro leading indicators that have been backtested for decades suggest otherwise. For more details, the following publication is still valid and provides you educational content on how to read the macro-indicators and what are they saying:
All the macro information above is hard data and charts, zero space for interpretation, as the technical setups mentioned above. The timeframes used to assess the shooting stars, dark clouds, and others, are analyzed for long periods of time, last week IWM and SPX were analyzed in long term charts that helped to do the right assessment. Remember: Charts do not repeat, patterns and technicals do.
If you invest or trade some of the following securities, this edition is for you: SPX, NDX, DJI, IWM, SPY, QQQ, TLT, GOOG, AAPL, TSLA, NVDA, META, MSFT, AMZN, GDX, SILVER, GAS, DAX, and BITCOIN.
Contextual charts are always added to assess correctly the indexes, and the S/R levels also include ES=F, NQ=F, and Ethereum.
The fundamental analyses library already includes: AAPL, MSFT, DELL, GOOG, META, SNAP, AMZN, SHOP, MELI, TGT, COST, WMT, PYPL, SQ, FI, NFLX, DIS, SPOT, JPM, C, BAC, and more. All those fundamentals are valid for weeks or even months, and all of them include historical data, they’re not a transcript from an earnings call, which is what you find in other publications (I have to say it). Subscribe and enjoy the menu in this section:
https://smartreversals.substack.com/s/level-up/archive?sort=new
This edition has a special reference for the MACD crossovers in the analysis for GOOG, that principle applies for any security. Let’s begin:
SPX