Three Charts that Continue to Incline Me to Caution

As a follow up to my post from earlier, I want to point out a couple of observations, one more on the S&P 500, one on Apple and one on the Dow. In all 3 cases, these assets are at resistance in various forms and it’s at least worth pointing out.

Now, on the S&P, I’ve been using a channel from the COVID crash low through the January 24th low, which is a bit arbitrary, but the 1/24 low seemed significant, and at least in the short-term, recapturing that channel will tell us something important. We’re right at it now (green arrow), and it’s not exactly the strongest recapture: more like we’re barely hanging on to it. Reentering the channel with great vigor and then retesting it from above would be preferred (we may still get that, but until we do, we should note that we have not yet). Today’s rally was a bit less than I was expecting (I know it was big, but given the rally off the 2/24 low, I was expecting something to begin looking like that rally).

SPX

On the Dow (this is futures, but you’ll see it on other Dow-related instruments), the trend line from the June and September 2021 lows seems significant because it served as support for the January low, but now serves as resistance. And, no surprises, we’re only back at it now. Until we recapture that, it’s notable that we haven’t. Otherwise, we’re just looking at a series of continual breakdowns, and that’s not very good to see.

YM

And finally, Apple, much like the S&P can be forming a big bullish wedge (orange structure) but it also remains below a very significant trend line that served as resistance before for almost a year. We briefly rallied above it late last year but have now fallen back below it twice this year. And we are right at it again now (the green line).

AAPL

So, bulls still have a lot of work to do, it seems to me. I told you earlier about the large blocks of puts that appear to have been bought all this week, and it’s notable that despite that, the actual equity put-to-call ratio is not all that elevated here. We could be in a place (psychologically) that at major lows, everyone panics and buys lots of puts, but then immediately closes them at any sign of a rally. And that worries me, because it may tell us that the melt-up narrative is extremely strong, and that everyone is just patiently waiting for it. And if that’s the case, it’s not going to happen.

So, I remain inclined bullish here, but also cautious.


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