Interesting Divergences

In the chart above, I lined-up the ES Futures day session with the 15 stock stochastic indicator, which I call the Sector Analysis Indicator (stochastic of the heaviest weighted stocks in the 8 SPDR Sectors which excludes utilities). This indicator compares the current price with the highest high and lowest low of the past 6.5 hours.

The futures market typically experiences a technical bounce whenever this indicator trades near or above the 75% level, and when it trades near or below the 25% level. When the futures market was making higher highs from the beginning of May through May 7, the indicator was making lower highs, which would have been a bad time to go long. As the futures market is making lower lows from May 6 to the present, the indicator is now making higher lows, which is probably a bad time to short the market.

However, the increase in oil prices and the market's perception of how oil will affect future prospects for the equity market may dampen any technical correction to the upside. Time will tell.

I also keep a separate WorkSpace, which shows the 15 heaviest weighted stocks from the SPDR's and the 8 SPDR Sectors. This allows me to see at a glance which stocks and sectors are strong or weak at any given time.

Charles