Looking at the chart of the S&P 500, traders are wondering if a higher low has been put in and is now the time to go long.
My opinion is NO and here is why.
For swing trading purposes, we like to enter on the S&P 500 hourly chart when the 13 hour MA crosses above the 30 hour MA.
We are still trading under the bearish cross of the 13 hour MA breaking below the 30 hour MA on Monday, November 12, 2018. We don’t have a bullish cross yet which suggests now is not a good time to go long this market. Friday is rarely a good day to go long anything short-term because of the weekend news cycle and the habit many traders have of closing out their positions ahead of the weekend news cycle.
The CMF has been improving over the last few days but it’s still negative. The Nasdaq is below its 200 day MA and the 50 day MA is falling fast. Twice the Nasdaq has rallied back above its 200 day MA only to fall back below it. These repeated 200 day MA headfakes are taking a toll on Bull’s emotions.
The Equity Put/Call ratio actually rose today!
If the market had put in a higher low, we would expect to see the Equity Put/Call ratio fall. Instead, traders are buying more PUT insurance than they are buying CALLS. Could the Equity Put/Call ratio surge higher tomorrow or next week? Sure but looking at the data as of right now, on November 15, 2018, it’s too early to go long this market when PUT buying is outpacing CALL buying!
But probably the most ominous sign for markets comes from the fact that the Russell 2000 had a Burial Cross today of the 50 day MA breaking below the 200 day MA.
Institutional Traders Are Selling Into Retail Buying
Institutional traders are selling into the buy orders of retail traders. Until that behavior changes, we should stay out of the market. For a sell order to process, there has to be someone willing to take the opposite side of the trade and buy. As soon as the algos detect buying in a stock, they immediately hit that stock with sell orders because they’ve been programmed to lighten up on positions. A great example of that happening today was in the stock of Walmart (WMT).
WMT posted third-quarter fiscal 2019 results that showed both top and bottom lines improved YoY for their third consecutive beat. Management even raised its earnings and U.S. comps forecast for 2019. But look at what Walmart stock did today on the 5 minute chart.
Good news is being sold which means it’s a bad time to buy. This suggests that Bulls do not have a lot of confidence in this market right now and so you shouldn’t be trying to buy bounces IMO.
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