The above is a 5-minute chart of the SPY. Today is the second day in a row where the TRIN and Ticks did have a bullish combination, suggesting a bounce is coming. In general, the VIX trades opposite of the SPY and divergences show up when both trade in the same direction. Notice on the chart above from February 16 through 23, the SPY made lower lows as the VIX made lower high and a bullish divergence.
So far from the high of February 27, the SPY has made lower lows as the VIX made higher highs suggesting the downtrend may continue. We are watching for the SPY to make a bullish divergence against the VIX; which could materialize before the week is out. Still neutral for now. Sold long SPX on 2/26/18 at 2779.60= gain 2.33%; long 2/20/18 at 2716.26.Sold long SPX on 2/15/18 at 2731.20 = gain 5.82%; Long SPX on 2/8/18 at 2581.00.
Yesterday’s volume was higher than the day before and high volume days are usually tested keeping the bigger trend bullish. SPY is not far from the gap level near 280 and most gaps are like magnets and get filled usually in the short-term. Yesterday and today the TRIN and TICK did produce bullish readings suggesting a rally is coming. The pattern that could be forming here is a “Three Drives to Top” and the third top is still in front of us. The potential Third top could form at the gap level near 280 on the SPY. A low could form short-term with an upside target near the 280 level (2800 SPX). Staying neutral for now
Over the last couple of weeks, the GDX/GLD ratio has modestly outperformed GDX and suggests that GDX may bounce short-term. GDX gaped down yesterday and left an open gap near 22.00 range and most open gaps get filled short-term and could be an upside target.
