The last two week are not sustainable much longer. As much as I have loved this rip higher after getting pounded for more than a year, I would suspect next week we are going to see a little sideways or downside action while the big money players start taking some profits. The angle of rising prices just can’t do this forever, the party will end.
The S&P 500 has had a incredible run up since November 7th. We have our two pivot lows and I used them to draw the short term green uptrend line. The angle itself is very steep and will be very hard to maintain. The rip this last week is even steeper and I marked that rip with the blue line. Volatility is at an all time low and the DMI is extremmely positive. So you have to ask yourself is this a good time to step aside because it needs a pause or a consolidation. My mind says it is going to slow, but since I use the monthly moves to make my decisions, this has to be considered as information and not time for action. So I like you hope this will continue for awhile and we can all have a very Merry Christmas. The logical mind in me says, it might not happened.
The Small Cap looks exactly like the S&P 500 and you just have to ask, how much longer will the rise last before a rollover? The only indication you can get on this chart is the DMI slightly rolled over this week.
The International index made some impressive moves this week. It broke out of the consolidation. It fired a buy signal. It confirmed a buy signal. So the I-fund is finally on the move and it is possible that at the end of December I will join the ride. But there are things that you have to see and know so you know what’s going on here. let’s first look at the weekly chart.
What I want you to see here is that there is a long term downtrend that has been running since June 2014. This is not easily overcome but it does happen. The largest battle is going to happen even sooner than that when that overhead resistance level is hit at $60.17. It has been rejected 4 times since April 2016. There is a positive here on the weekly chart in that the DMI just crossed over to the positive this week. But looking at the same DMI since last April, it was failed several times. Let’s now look at the monthly.
So there are several things we can see and argue about here. The bottom red line is an uptrend line that is long term since March of 2009. The upper red line is a intermediate downtrend line that formed in June 2014. We could also argue here that the outcome is still up in the air and betting one way or the other is just a gamble. I think it is way to early to know, but I want you to see is that even though the daily fired a buy signal, the overall trend is down to unknown.
Bonds are just grinding and all indications are is that will continue for sometime to come. The Volatility is up and DMI is negative. So there is just nothing to like here today.
Conclusion: I’m cautious going looking forward in the C and S because of the rapid and unchecked rise in prises. The International looks like it might be coming to life, but be aware of the longer term trend. Bonds are a waste of time today.
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