Keep an Eye On Transports

The SPY pulled back to its breakout point today and found a few buyers at the close. Nevertheless, our scans today found very few reasonable long set ups. Generally when we find so few long set ups the market is projecting another negative upcoming session.

On Friday the SPY broke its trading range so we could arguably say the near term trend has moved from a sideways trend to an uptrend. Yet, with today’s lack of follow through we hesitate to make the switch in our Risk Assessment Meter. If buyers come back in tomorrow then it would be more reasonable to adjust the meter and call an uptrend. The proof is in the pudding though and as of today’s close the evidence is just not in.

Oil has been the tail wagging the dog and USO, while still in a steep downtrend, is in an area where buyers may indeed show up. The transports appear to be projecting a turn around in the oil trend as false breakouts in the sector are legion. From failed moves come fast moves so the failed breakouts in the transports may be sending us a clue as to what to expect from the market this week.

Time will tell.