Over the last couple of sessions, as I highlighted to members last night, stocks continued their short-squeeze directed creep higher, fully achieving the simple 2,100 Round Number target.
The negative divergences flash a big caution sign as price initially moves down away from this target.
We’ll update our key levels, highlight the divergence, and of course note trending stocks today:
Let’s start with an update from the prior update on the current range and breakout targeting for the S&P 500.
It took about a month to occur, but price FINALLY managed to break above the upper resistance line near 2,070.
This instantly triggered a short-squeeze (short-sellers taking their stop-losses) at the same time buyers (bulls) added to existing positions or put on new bullish breakout positions.
With 2,100 achieved, we’re seeing the logical and expected movement (retracement) down away from the target.
Notice the lengthy negative Breadth Divergences into this target.
However, our alternate thesis still calls for bullish breakout plays if buyers trigger ANOTHER short-squeeze.
Let’s see what our Breadth Chart reveals about current market strength (or weakness):
Sector Breadth – like the negative divergence shown above – also suggests a bearish play down from 2,100.
That’s because our weakest sectors are the bullish/offensive names like Financials, Energy, etc.
The strongest sector is the defensive Utilities followed by Staples (and Industrials).
This isn’t a picture of gleaming bullish market strength – quite the opposite.
We have potential bullish trend continuation plays in the following stocks from our scan:
Cinemark (CNK), Terex (TEX), Brinker (EAT), and HomeAway (AWAY)
Potential downtrending candidates exist in stocks showing relative weakness today:
First American Financial (FAF), AutoNation (AN), Ann Inc (ANN), and Exxon-Mobil (XOM)
Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning.
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade