Nothing can go almost straight up forever because eventually someone or some business that is invested is going to take profits. An average sudden burst up, down, or consolidation sideways last about 14 to 21 trading days before they end. Average is the key word and not something that is a cold hard fact. Then we have a period of down side selling and or sideways consolidation. What we want to see is a pivot high created higher than the last pivot low and to begin a stair step climb higher. They look like this:
Obviously, we want the figure on the right. When this current run up started we were at position 1. This is a new uptrend and not one that would be confirmed like once pivot 3 is created. Once you reach pivot 3, you have to trust an uptrend is on. So let’s look are our indexes.
The S&P 500 ran uphill for 14 straight trading day almost without pause. So the current roll over in my mind is expected and normal. What happens next is what is important. Can you find the number 1 on the chart where the uphill run started? Follow it up until you see the number 2. Number 1 is a pivot low and number 2 is a pivot high. What we need now is a new pivot low formed before price falls below pivot low 1. While we are waiting and watching this happen, warnings could still be fired. My system for calling sells on a daily chart is price breaking down through the CBL and moving average they both move based on price. My only concerns today based on the current chart is falling below that resistance that took so long to break through. I would really prefer that a pivot low would be formed right where price is now. So is the party over? Nope, but it has slowed and now we watch and wait to see if can the next step in forming a solid uptrend.
The Small Cap daily also ran for 14 days uphill without pause. That ended last week and ended pretty strong with an almost 2% pull back. Price finished the week settling right on my CBL sell line. A close next week below that CBL level, will fire a sell warning. The 50 day ma is still safe as you can see it rising in light blue. The other bonus here is that the 50 day ma is on top of the 125 ma which helps to show a long term uptrend is on. The S&P 500 is in the same formation. Everyone thinks that this rally started the same day as the election, but that’s not true. Look back up at the S&P and above to the Small Cap and you see price leveled out Thursday and Friday the weekend prior to the election and then ripped up on Monday the day before. We can still refer to it as the Election rally if it makes everyone happy. What would make me happy is for a new long term uptrend form and run for awhile. Small Cap is safe today.
The International is showing us all what a sideways consolidation looks like. This run is entering the window that something needs to happen. 13 trading days without a breakout in either direction. Which way will it break? Well based on the fact that the index has a short term downtrend in the works and the index is a sell daily, weekly, and monthly, the odds are greater that we breakout to the downside. The green CBL is the buy line and price would have to close above that and the 50 day moving average in order to fire a buy. Also notice here that the 50 day is below the 125 ma which is another clue the odds are we are going lower. Not much to like here yet, unless you are bottom fishing on hope.
Bonds continue to sink lower and that red line showing long term support is in trouble. Volatility and DMI on the chart is down right ugly. Even selling volume appears to be picking up. Not sure what this is trying to tell us in overall market, but investing in Bonds seems a bit silly at this point. To invest in bonds today would definetely be a bottom fishing game. Nothing here to like.
Conclusion: Things have slowed down on our two screaming indexes and hopefully will create that higher pivot low before reaching position 1 marked on the charts. If we do get that higher pivot low, it would be a great place for those sitting on the sidelines to get in. So watch and wait. If that pivot low is formed correctly, I will do my best to post about it the night after the market closes. That way you could get in the next morning. So is the party over? Only time will tell.
No comments:
Post a Comment