mcm daily market update 06.Jul.21

ST trend: neutral (with bigger correction potential)

On Friday we were noting that the trend was still up, as ML continued to hold and FGSI continued to paint confirmed highs. That pointed to the usual upward bias going into a long w/e will play out and indeed it has, with the market finishing with a new ATH.

However the up squeeze from the 2nd part of the cash session triggered a bearish pattern in FGSI, namely a 45 degree angle divergence. When these large divergences between FGSI and price happen, they are normally bearish as they indicate determined selling so basically distribution as the price goes up. This type of pattern was followed text-book until now, as price retested the divergent high and was rejected there. Now buyers look inefficient via FGSI. We also have additional warning signs. On the retest of the high (which actually made a minor new high), we had large unconfirmed highs on IGSI, MGSI and also FGSI showed an unconfirmed local high. All pointing to the POTENTIAL for a bigger turn. ML is being tested now and as usual, it is the key for the near term trend. If sellers break below ML, that would be a big warning that the 45 degree angle divergence on FGSI is indeed playing out (pointing to a larger decline). Buyers would need to best the o/n highs and run a bit further to cancel the bearish potential. Right now this looks like lower odds though.