As most of you know, I do not follow the news because it always influences our decisions and normally it is wrong. Price and trends on a chart have no emotions. Daily charts move fast and can give us an idea that the winds are changing in the Stock Market. But even the fast moving daily charts can make one make some poor choices. Weekly charts move much slower and can really start to calm your nerves but I normally just use those to help confirm daily and monthy charts, meaning when the daily and weekly is a buy, the monthly should be right there with them. Having all 3 charts in the buy mode is good. The monthly charts will never get you in and out at the tops and bottoms, but will help the irratic moves and drama of the markets. It is as close as you can get to buy and hold as the brokers and supposedly smart money managers preach.
The big drop Friday had an affect on every daily chart we monitor here. What concerns me here is not only did price close below the CBL and 50 day moving average, but that long grinding channel broke to the downside. That could mean short term we are headed lower. The primary uptrend line in green is still safe, but another down day like last Friday would put that in jeopardy. Volatility jumped up to the normal level in one day. DMI index flipped to negative in one day. So in conclusion, there was drama selling or profit taking that only next Monday and Tuesday will confirm. If prices continue lower, then this could be real. But I expect that we will see day or two of lower prices and then a snap back. You do not have to look far to see drama that reverses quickly. Just look down the uptrend line and see where price touched it last. That was 5 days of snap down and back up again.
The Small Cap which has been a leader in the stock market could not escape the down draft of selling Friday. The CBL and 50 day moving average were both broken at the same time. The uptrend is still safe, but a warnings 1 and 2 fired.
The International did see that same amount of damage Friday but since it is so early in all the buy signals, most of the sell levels are still safe. We do not have a solid uptrend line here, so a sell signal on the daily chart is very sensitive. All that has to happen is the CBL and 50 day to fall and it’s over. Right now they are safe. The only concern here is that the overhead resistance, the horizontal green line, was not broken and price rejected that level. Getting above that level will help confirm a new uptrend, so we watch.
Bonds really took it on the chin Friday, but you also have to remember that buys and sells here on all levels are so tight that just pennies can make move. Friday a solid sell signal was fired. Not good for bonds, but it could mean good things for stocks. Normally when bonds go down or grind sideways, the stock market goes up. Bonds mean safety. So if they are selling bonds, where is that money going to go? T-bills are option, but the return is so low that money manager will look for risk and reward in Stocks. All that aside because it takes time to confirm it, we need to watch bonds prices Monday. If they do not recover to the levels shown in the box, the daily sell signal is confirmed. That price level is $112.31 or a .58 cent move. I told you things were tight here.
Conclusion: Friday could just been a one day event that Monday and Tuesday will reveal. I do not think we are starting a new trend lower because we have been in that mode or sideways grind since August of 2015. The weekly and monthly charts are still safe, so I wait to see.
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