We have just shorted 1/2 position on the NDX at 2630.

There is a negative divergence between the NDX and the SPX: while (in H1) the NDX was the clear market leader, we can notice that the SPX made a new high yesterday (vs mid june) but the NDX didn't.

Has the NDX lost its ladership?

Looking at our indicators, we can notice that the Trend Level (TL) is at '5' (overbought) for the second consecutive day.

We know it can remain at this level for a couple of days, but this is a warning signal that a short term top is not far.

Looking at the Sigma Trading Oscillator, we can notice a negative divergence between the Sigma Market Index (in blue) and the Sigma Trend Index (in red): higher price but lower Sigma Trend Index:

Looking at the Sigma Trading Short Term Sentiment, we can notice we are at  elevated level (blue line). This is another warning signal but we also have to admit that 20% is not 'euphoria'.

Conclusion:

It seems we are not far from a short term top.

We don't have any idea if it will be a short term top or the major reversal we are waiting for. We will have to analyze retracement levels and the velocity of the move (when it happens) in order to detect if we are in presence of a trending move or a counter trend move.

Current position:   

- short 2.5x std size SPX at 1331.28 (stop loss at 1370 for 1 std size)

- short 1/2 CAC at 3250 (stop loss at 3270)

Have a nice day

We wrote on Thursday:

"Looking at the Sigma Whole Market Index (aggregate of 16 US indexes), we can notice an important reversal day (today). In this context, it seems that the consolidation is still alive and further upside within this bounce back is possible (upside to the horizontal green line)"

Nevertheless, we had never expected such a rally and were were really surprised by the violence of Friday's move.

Looking at our indicators, we can notice the huge move from the Swing indicator, moving from 3 to 5, telling us this move (to the upside) is probably not over.

On the short term, the Trend Level (TL) is at '5' (overbought territory).

Looking at the short term sentiment, we can notice that 'euphoria' is peaking up (red line), reaching level in line with previous tops in the market:

Conclusion:

We have to admit that this scenario is not the one we were expecting, and most of our positions hit their respective stop loss during Friday's session.

Looking at the nature of Friday's move, it looks like a pullback is possible early next week, but higher price should be reached later in the week.

Even if we consider that current move remains corrective, we have to respect what happen on Friday: a powerful impulse move (to the upside).

Like I often say to my colleagues: "never try to stop a train with your hands, it could hurt..."

If we have a pullback on Monday, we will reduce  our short position on the SPX, and we will wait on the sideline, waiting for an opportunity (long or short).

We wish you a nice week,

SigmaTradingOscillator

Current position:   

- short 2.5x std size SPX at 1331.28 (no stop loss in place)

We uplift our stop loss on the SPX from 1354 to 1365 (for 1.5 std size)

Our pending order on the cac40 was executed at the open at 3134.26 (our limit was 3092

=> CAC short 1 std position @ 3095.63 (avg price)

Current positions:   

- short 2.5x std size SPX at 1331.28 (stop loss 1354 for 1 std size)

- 1/2 short NDX at 2565 (SL 2613)

- 1 short CAC at 3095.63 (SL 3165)  (uplifted to allow double top)

No more pending order (except stop loss)