The volatility is slowing down in the markets compare to past few months. I don’t know what should I say here, but I don’t feel good about it. The market has been rising based on hopes for past weeks, and now also slowed down. I expect a pullback here if not a reverse. Even I’d like to see another major strength come and send markets higher, but I doubt that it will come soon. Next week, there will be another FOMC, will Uncle Ben lower the interest rate again, if yes, how much? If no, how badly could market react? Right now, I don’t plan to do any longs, shorts?… maybe. But I would rather take the cash position, and wait for further clearity. Let’s examine the daily chart of SPY, QQQQ, and XLF:

1. 2.  3.

1. SPY: On the SPY daily chart, you can easilyspot the bearish divergence between price and Stochastic/CCI. The momentum is not as strong as it should be (or you expect it to be), which send me some warning signals. You may say that the 20 and 50 EMA crossed over, which would show a bullish signal, ”yes” only if we are in a trendy market, but 200 EMA seems like a strong resistance, for the past a few days, and 50% Fibonacci Retracement is just above it sit at 140.71. Hence, as long as the price is below these levels, I am not bullish on SPY. I am watching whether 137 will hold up the selling pressure by the end of the week.

2. QQQQ: Qs is relative stronger than SPY, even there is a bearish divergence showed in the chart, it doesn’t look that bad. The earnings of APPL, MSFT and BIDU are coming up, whether the market will sell off on news or keep buying I don’t know. But it will be clear by the end of the week. A bullish note on QQQQ is that it formed a higher low and higher high, whether the strength will last, we have to wait and see. I am watching 46 and 48 levels on Qs, and have a slightly bullish to neutral sentiment on Qs. If 46 couldn’t hold. SELL!

3. XLF: The financial sector seems like the weakest, a lower high is formed, I am expecting a lower low, which will drag it back to 24 level. Hey! I could be wrong here. On the up side, 27.17 is pretty strong, and seems unbreakable. So I am bearish on XLF till 27.17 is broken.

Good Luck and Happy Trading ;)