This week was a very interesting week to me because if you listened to all the negative news in Europe and here in the United States, you would have thought that we would have seen nothing but red. We had 5 days in a row that closed higher than the last. Most markets also saw 5% gains and I think it caught a lot of people flat footed. Me? Well I’ve been saying for awhile that I thought things were headed higher based on the charts. What through me a bit was last weeks Lower pivot high, because that normally means that things are reversing. So let’s look at the 30 minute chart first.
What catches my eye first is that price once again did not close below that purple base line and never really got close. Then on Wednesday, price cleared the red 5 day moving average and started to climb. By Friday the 5 day moving average was crossing above the10 and 20 moving averages and is the second confirmation that things are turning up. You can also see on this chart the high price of 1230.71 and you will also see on the daily chart that this price needs to be cleared in order to create another higher pivot high and keep this uptrend moving. On this 30 minute chart, we always want price to be above all moving averages because it will indicate an immediate uptrend.
Next I wanted to show the daily view and you will plainly see the 5 up days in a row. The things that are most important to note here is that we stayed firmly inside the uptrend channel. Thursday and Friday closing price cancelled out that lower pivot high we had last week. Next major thing to note is that price is almost on top of all moving averages and the 10 has crossed the 20. Just like the 30 minute chart, we always want price to be above all moving averages. Next major hurdle is for closing price to close above $1230.71 which is shown with the yellow dotted line. If this happens, I would be willing to put my remaining 30% safe G money into the markets.
One more S&P 500 chart that I think you need to see and that is the weekly. The only thing that is of importance to note is that we have a new pivot low formed on this chart. It took 5 weeks to form, but with the closing price confirmation this week clearing the entire bar from the week of August 8th. Just a reminder that prices normally go up for at least a little while once they form a pivot low. This is just way to early to call and is just another indicator that maybe all this negative news is not what the big boys are seeing. Some have heard me say this before, is it really important to know the news when price always follows whatever big money is doing? Do you really think you can out smart the guys that trade for a living and do this 24/7? Last question, do you think you can see what big money is doing with a chart? You bet cha. Believe me, if things are so bad that they are bailing you will see it just like in 2008.
The Nasdaq is actually moving up faster than the S&P 500 which is good and it should since it is a good breadth of all tech and small companies that have the most risk. The Dow and Small Cap are looking good and are only slightly lagging behind the S&P 500. What I would still stay away from in the International Index because it is still in a confirmed down trend and could be the only thing that would trash our markets over here. Things I want to you to watch closely is the AGG (bond fund) and Gold (GLD). They are starting to rollover and within a few days could be in a full fledge down fall. Gold looks the most risky and if it starts to rollover, that money will go somewhere and my gut says the US Stock market. Scroll down a few post back and you will see my correlation call with Gold and the S&P 500 and you will see that money will likely come back here. Below you will find Gold and AGG and my notes on them.
Conclusion, I would consider highly transferring monies into the C and S at this point. I believe if we go through $1230.71, that more high’s are on the way. I also believe that if Gold and Bonds fail, then that money will run to the stock market. I gave you lot’s to think about but remember, no one knows what is going to happen in the future, but you can get a sense of what is happening now if you can read it. I’m as surprised as you seeing what happened last week since we were coming off a new lower pivot high. So that just proves, that know one can see the future in the stock market. If you get in, know where you have to get out at and do not fight it. Our line in the sand still remains the same as last week $1140.
TSP Distribution: C-fund – 35%, S-fund – 35%, G-fund – 30%
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