MIKE PAULENOFF'S ETF TRADING DIARY
In my world (starting to feel a lot like "Wayne's World"), I usually don't see this many momentum non-confirmations while the price structure makes new highs! Momentum peaked on September 5 with the SPDRs (SPY) at 131.85. Each successive new high within the upleg off of the July 18 low at 122.39 -- at 132.45 on September 13, 132.77 on September 20 and 132.85 today -- my RSI momentum gauge made lower highs!
In the past, when this type of "set-up" emerged, one of two results occurred: either a very serious price implosion that confirmed that prices were on borrowed time, or a powerful upside explosion in prices that spiked the RSI upward very quickly to adjust the lagging momentum situation.
Right now, my work is telling me to remain positioned for the former, but not to add to short positions until ruling out the latter. That will only occur on a break of the near-term triple bottom low at 131.00, or on a downside exhaustion reversal from a gap-up to new highs.
Based on today's strong close, we could have some answers within 24 hours.
Mike Paulenoff is author of the MPTrader.com ETF Trading Diary (www.mptrader.com), a real-time diary of his technical analysis on equity markets, futures, metals, currencies and Treasuries.
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