To be honest there is just not a lot to talk about with the stock market this week. As scary as all the news was, we basically just rode sideways. The S&P 500 is the only index that is currently under any stress. The CBL has currently failed but not by much. Most of you understand how I come about the CBL, but if you don’t, the CBL is set by me not the market. It is based on price, and me counting movement tracing backwards to the lowest 3 points. It indicates to me with individual stocks, that if the CBL is broken, it might be time to sell that stock. So getting back to the S&P, price is sliding sideways, price is safely above the 50 day ma and the trendlines. If your out, stay out and if your in, stay in. We watch and wait.
If the Small Cap index is an indicator of the market, then we have nothing to worry about. Take the news out of the equation and this I think looks like a normal healthy market. So here in the Small Cap or S-fund, we just watch and wait.
The International Index has definitely pulled off it’s highs but as of Friday it is still holding above the support line in Yellow. If price was to break or close below this line, what it means is that buyers looking for bargain prices did not think price was a good bargain. If you look closely at that line that I drew on September 20th, you will see that it has been tested 4 times and held. So I see that as a good thing so far. Would I consider it a warning if that level was broken? No, but I would be concerned that the CBL and 50 day moving average would fail soon back to back. Looking closely at both the CBL and 50, you will see they have merged into one price, so it would be possible to get 2 warnings in one day. Conclusion, we also are just sitting here waiting and watching.
Finally we have Bonds. Since the buy signal fired a couple of weeks ago, price has just been meandering sideways. No gains or losses, just sliding sideways. The chart is the buy chart and we really need to change this into a selling chart, so below is the new chart.
So what we see is the new Bonds chart that transition from buy to sell. Once your in a stock or index, the buy has to put aside and the sell chart has to be used or created so you can protect your profits from losses. This also protects a new position from taking to big a loss. Little losses are ok and part of the game, big losses are just plain unforgiving. So what you see above is that the new short term uptrend is likely going to fail next week. It is to sharp to be maintained. The CBL is also drawn so we will protected from losses. So let’s look really close here, the short term uptrend, CBL and 50 day moving average are really really tight in one location. This is how we protect from large losses. All 3 have the potential of failing in one day. This happens when you first purchase a stock or get into an index. What needs to happen for this to work is what I call, “you need time to spread you wings.” Basically you need price to move uphill away from the 50 day and trend lines to give room for pull backs. Sometimes it just doesn’t work and when that happens, you get out. That is what might happen here with Bonds. So once again, we wait and watch.
The last little thing that is important is that last Pivot low. If price can stay above that pivot and create another higher pivot low it would help confirm the buy breakout from a few weeks ago.
Conclusion: Ever index we have at the moment whether your in or out is just a wait and watch to see what happens. I believe when they finally come to a conclusion on the budget and debt ceiling, the markets will roar to the upside. The longer they play this silly game the more likely we will churn sideways and down. So we wait and watch for price to dictate to us.
Hope all are having a great weekend.
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