This week’s market overview highlights what we anticipate the futures market to do for the upcoming week.

Market Overview

Last Friday, the $INDU (DOW) dropped 205 points putting many stocks at or near the ATR (*). This means  if you are for an entry point, either long or short, you need to be looking for a smaller time frame for an entry point, specifically an ADX Peak (*) on either a 120, 90 or 30 minutes chart. Before showing an example, let’s examine what is happening on the mayor indexes as a reference point.

On the $SPX, weekly chart, the last bar closed down with increasing volume (the bar indicated by the yellow arrow) (13,687,992.00) however it is sitting close to the previous support at 1,425.53 indicated by the yellow dot or THD Trend SR (*). Take notice that there its overhead resistance at 1,474.51. The index has traded in that range for the past six weeks. If next week it breaks support, the next support level is set at 1,397.37.

market overview futures

On the monthly chart, if you follow the green lines, you can see that a volume divergence is being formed. It is important to keep an eye on this one chart because, if the divergence plays out, a considerable pull back can be expected.

market overview futures

On the $INDU (DOW), the weekly low was set at 13,296.43 which coincided with the previous week low. This is now a supporting point. The most relevant observation is that this week support was formed with a red volume bar (see yellow arrow) and the price bar itself closed at the low end of the bar (bearish). This is an indication that the market may continue down. If it breaks its current support, the next support level is at 13,024.50.

market overview futures

On the monthly chart, the volume is low but remember the month is still not over so the price bar needs to close for us to see what the actual volume is for the month. Pay attention to the volume divergence already taking place. Personally I would not take any long term position at this juncture.

market overview futures

The weekly chart of the $COMPX (NASDAQ) shows a strong movement on the downside. You can see the price bar going through the THD ATR (*) accompanied with strong volume. This push created a new low. There are two supporting levels right below it. The THD MA (*) is sitting around 2,822.69 and the THD SR (*) around 2,726.72. Both of these are support levels are targets at the moment. Unless the bulls decide to show their faces again and push price to the upside I would not consider any LONG positions.

market overview futures

On the monthly chart the situation is consistent with the other indexes. Volume divergence also indicative that any potential move at the moment needs to support by strong volume with UP (bullish) bars or the contrary the situation looks strait for those considering long positions.

market overview futures

I encourage all of you that are option and stock traders to use this methodology to gauge market direction. Any position that you make must me supported also to the overall market and you must manage accordingly.

See you next week as I will post the weekly and monthly outlook for the markets.

(*) These are THD indicators. If you want to know more about them please visit the THD website.