It was a very discouraging start to 2014 when prices decided to pullback. We cannot always expect prices to go up because the machine is going to take a profit from time to time. I think starting next Monday that volume will return to the market and traders will be back to work and then we will know direction. So until we see that, let’s look at the charts.
I think a pullback here was actually needed because of the sharp angle that prices were climbing. The CBL moves up with price moves, so when prices reverse the CBL will be the first level under attack. Thursday and Friday tested the CBL but it held. Price structure to me still looks good and we just sit back and watch.
Just like the S&P, the Small Cap is testing the CBL. Price structure also looks perfect here so we will just watch. Remember that both the S&P and Small Cap just hit all time highs within days, so pullbacks are normal and healthy.
The International index did a hard pullback this week and at one point was down almost 2%. Unfortunately this has fired warning 1 because my CBL line has been broken. Keep in mind that just 3 days earlier, the International hit a high dating back to July of 2008. Price structure here still looks good to me, so we just watch.
Looking at the chart above would you guess that it was the winner for the week? Bonds pulled off a very minor gain at .18%. I think it is still way to early to give up on stocks and jump into bonds. Prices here are still churning and still look weak.
Conclusion: I think with the holidays and New Years day falling in the middle of the trading week, no conclusion can be drawn from this weeks charts. Starting Monday, the majority of traders will be back to work and it should be game on. Which direction will we break? I will not guess, but we should know quickly.
Have a great weekend.
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