On Friday the QQQQ rallied up to threaten a breakout, but on weak volume. Meanwhile, the financials remain under distribution and are poised to fall off the cliff again. The SPY may be forming the right shoulder of a head and shoulders pattern, again, on very weak volume, while the small caps represented by IWM, closed above resistance.
The Dow, well, the Dow looks about as ugly as the financials.
Add to this the fact that steel looks poised to break higher, along with some ag stocks, while oil sold off from its highs last week on the heaviest volume recorded by the USO ETF.
Then we have a VIX (fear index) trading back at levels of complacency not seen since last October when the market formed a top.
Add all these factors together and something has to give. Should steel be chased here? Will steel rally while the market slumbers in a trading range? Will the QQQQ break higher, pulling the financial heavy SPY and DIA with it? Will they diverge even more than they already have?
There are a lot of questions without answers here. Frankly, we believe that risk is very high on the long side here, but until confirmation is achieved, it's best to maintain a certain level of agnosticism about what to expect from the market as we move into summer trading.
The risk assessor tells us to remain short SPY here.
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