For the first time this year the bears have a little downside momentum going. The S&P 500 is looking at its longest losing streak since the bottom on December 24 and there isn't any obvious support level nearby. With a negative close today this will be the first 3-day losing streak of the year.
The indices have had some remarkable losing and winning streaks since December 1 so it is easy to jump to the conclusion that another trend is going to develop. The computer algorithms have a tendency to amplify momentum which is why the indices keep moving from one extreme to the other.
As I discussed in my opening post I believe that it is likely that we will see a trading range develop at this point rather than another strong trend. Both bulls and bears have had success recently and are inclined to have stronger views at this point. In addition a big part of the recent rally was caused by low expectations during the earnings season that dynamic has ended and most of the catalysts are likely to be news headlines about China trade, politics and economic growth. The Fed is now firmly dovish and that is no longer going to drive the action as aggressively.
If I am correct about a trading range developing then there should be some good chart develop as stocks pullback to some support levels. A good example is Qutoutiao (QTT) which was one of my recent Stock of the Week picks. QTT moved from a low of $4 in early December to $13 last week. It is now pulling back on lighter volume. I'm looking for entry points in the $9-10 area as it consolidates. How deep it pulls back will depend on overall market conditions and if this selloff gains momentum it is not going to hold support but if this is trading range action then it should have another shot at upside.
There are quite a few charts that look like this and it will make for some good trading if we do see trading range action in the weeks ahead.