Head Games Galore

The nature of a market melt-up is that classic bearish reversal signals are routinely ignored and even openly mocked. After all, if "stocks only go up because 'they' won't let them drop," is the prevailing mantra then what good is it to assign any significance, whatsoever, to textbook potential reversal candlesticks or patterns? 

Simply put, that mantra works brilliantly until it does not, as is the nature of a bubble. 

Thus, why would anyone give a hoot about the reversal candles just today in the big banks (See: XLF ETF, GS JPM, etc.) or the small caps in the IWM? The answer, of course, is that just about everyone does not give a hoot, at least not yet. 

As far as upcoming events, we had Powell give remarks today which more or less echoed last week's FOMC presser as hedged virtually every statement about the economy and gave no indication he had the desire to effectively crush inflation. Semiconductor Micron reports tonight, then Costco on Thursday evening as we are more or less in between earnings season. GDP is Thursday morning, as well as some other big macro data later this week. 

Another seemingly obsolete concept in technical analysis is "overhead supply," or prior trapped buyers who have been made whole on a snapback rally being much more likely to sell than buy more or hold. Again, given the nature of this market melt-up no one seems to take that concept seriously anymore. 

But as you can see on the XHB ETF for homebuilders, below, on the weekly chart, overhead supply is, in fact, relevant now. The rip-roaring summer rally the homies enjoyed may finally have hit the wall of reality...and supply.