This week, I was honored to be back on Futures Radio. It’s always an amazing feeling to know your work is respected beyond the forex sphere. Futures are a special instrument with the element of time added to the mix. However, Anthony Crudele, the show host and creator, is big technical trader. So he started a new series on Futures Radio talking with different traders about how they use technical analysis in their trading. Mine is Episode 2. Enjoy ☺️
No. But I got you to click on the article so thank you. And hear me out.
Two years ago, the S&P 500 ($SPX) soared to then new all-time highs. But at that time, those new highs did not have momentum behind them. In fact, price diverged with momentum, measured by the RSI, for all of 2013 and 2014. It was finally in 2015 where equities started to falter. And at this time last year in 2016, prices in the $SPX fell over 14%. Some started to predict another stock market crash.
Instead, a couple things happened with the technical indicators that I watch. First, momentum had worked itself into bearish territory. So there was plenty of room at that point in 2016 for bulls to push price and still remain now comfortably bullish at even higher prices. That has panned out.
Secondly, the lows at the 1800 support level was a major support level. Price had dipped to this support level before and had held above it.
Lastly, the lows at 1808 also found support in the zone of Fibonacci levels. In fact the low is a pip shy of the 50% Fibonacci level. This weakness in stock prices proved to be a mere correction of the tremendous rally after the 2013 lows.
I say all that to make clear a very important point about today’s new all-time highs. There is absolutely none of that happening now. Momentum is supporting these new highs. The RSI is well into bullish territory and edging into overbought territory. An overbought market will eventually dip lower but it will be met with so many buyers who either missed this rally or are adding to their current long positions that the $SPX will quickly move to new highs again.
Regardless of what we think of the 45th president of the United States, it is only price that pays.
— Lydia Idem Finkley (@faithmight) February 17, 2017
I am a registered investment advisor with FM CAPITAL GROUP. Our vision is to manage capital with the intent of building client wealth in investments that positively impact our communities.