SPY, Building Up Steam

The market has been consolidating now for a week. It's been a nail biter. It makes sense however that such a consolidation should occur after the incredible rally that preceded it (which itself came out of an grueling consolidation).

What I see on the chart for SPY is very, very compelling. First take a look at the bullish divergence on the RSI. SPY has been fluctuating pretty wildly but the fluctuations have been diminishing. What we have is a triangle from a technical perspective. Now normally a triangle is bearish but the thing about triangles is that they switch character when the chart gets closer to the apex. They become bullish. The triangle represents a war between bears and bulls. Here we see the bulls have set a hard, almost flat floor around 130.60. That floor has been tested numerous times. The bears have been driving the price down but the bulls have not conceded.

Meanwhile, the RSI has been ticking upward. If this were occurring on an intraday chart I say "look out!" but on the minor trend chart I'd say this represents a potential springboard action.

Consider the shape of this consolidation on the 30 minute scale vs. the prior consolidation on the daily scale:

Similar looking right? I believe the same result will happen at the small scale as happened at the large scale, an explosive rally. Whether that rally takes us to a new top or just gets us closer to the top I don't know.

It's also worth looking at the fibonnaccis for the current consolidation (small scale):

Here I've drawn the fib not from the high but from the gap into the high. I believe the high represented an overshooting of the rally, probably a firecracker set off by stops. That leap, literally into the air, throws everything off. Things start to look more sensible  if you draw the fibs like this, with the floor just a hair below the .382 fib. What I've drawn in here is the absolute low for this consolidation which was 130.14. This occurred at 4:00 AM and my charting software does not include those quotes. As it turns out, that low is precisely where the .5 Fibonacci retracement lies.

Finally I think we should look at UUP as the dollar continues to influence the direction of the market:

This is the 15 minute chart and within the minor trend. For now we have a definite resistance ceiling marked by the green line. We have a distinct curved top which looks to be the end of this micro-consolidation. Finally the RSI is making a rounded top. This of course only indicates a red bar down to the blue line which has marked the support line for a very long dollar consolidation period. If it bounces there then all bets are off however if it breaks through that line then we will almost certainly get the second half of the previous rally.

Meanwhile AAPL has made a new top which is certainly a warning bell:

However the RSI shows that there's plenty of room for this stock to go up. The black line marks the highest prior peak which was at 80. Again, after such a lengthy consolidation (longer than the market itself) a strong rally shouldn't be unexpected. It does not look like we will get a negative reversal as occurred heading into the prior consolidation, at least not in the short term. This itself may indicate that AAPL has quite a bit further to go, although I won't be going long this stock!