NEW YORK ( TheGoldAndOilGuy.com) -- U.S. equities opened higher Monday and are setting up for a sharp pullback based on technical analysis using trends, cycles, momentum, volume, market breadth and key resistance zones.
Take a look at the charts below for a quick flash of what I think.
Barchart Market Momentum Index
This chart I look at daily. In short, if its price is at 101 or higher I expect the broad market to pause or pullback within the next day. It tells me if stocks have moved too far in one direction on a daily basis and if so sellers (big money players) are likely to re-align stocks by taking profits or shorting during these times.
Stock Trading Above the 50-Day Moving Average
Here we can see that while the
has been rising over the past six months, fewer stocks are trading above their 50-day moving average. This means a smaller group of stocks is holding the market up and it's just a matter of time before those stocks burn out and roll over, too.
Key Sectors That Move and Lead the Market
SPY Swing Trading Analysis -- Daily Chart
The S&P 500 is breaking down from its trend channel and testing a short-term resistance trend line. Odds favor sellers should become more active and pull the market down as they unload any remaining long positions and possibly get short the market. Both of these actions will put pressure on U.S. stocks.
Big Picture Outlook -- Don't Get Me Wrong!
This chart is just to show you what is possible. I am not a perma-bear, nor do I want another bear market like this to happen. But knowing what is possible still has to be known. Major market tops are a lengthy process and tend to take several months. If this is the case then it could be a wild and choppy market for the rest of 2013. Do not expect price to just collapse and freefall for 18 months. Dreams like that do not happen. Bear markets must be actively traded as they carry a lot of risk.
The Technical Analyst Conclusion:
This week is do or die for U.S. stocks. We need sellers to step in here and pull stocks down. With the S&P 500 trading at resistance, stocks being overbought on a short-term basis and the holiday week behind us -- which typically favors higher prices -- it is now time for sellers to become active once again.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.