What a difference a week makes. Last week it was all gloom and doom, and I had to caution readers about being overly pessimistic given the overall technical picture and oversold market conditions.
This week the tables have turned. Market internals are as overbought as they come, and it's time to caution against excessive optimism.
Turning to the intraday chart, we find SPY firmly in the middle of the bear flag. The key levels to watch are clearly defined. A trip up to the top of the flag or a drop below 120 (1200 basis the SP-500), whichever comes first, should provide excellent shorting opportunities.
The channel chart supports this view as well:
Monitoring market sector rotation offers another useful way to spot early change in trend signs. The charts below are from my blog, and highlight the contrary nature of gold in this process:
