So are the daily charts being to show signs of an inpending down trend or are they just forming bull flags? This is a question that is easy to answer months from now, but today in the now it is a little more difficult. One look at a daily chart and you can say we are rolling over and a quick look at a monthly chart and you cannot see much to talk about. So today I will show the normal daily charts, but the first chart I want to show is a picture of 6 charts. What you will see starting on the first row is a 1 minute, 5 minute, and a 15 minute. Then the second row will be a daily, weekly, and monthly chart. So let’s look at the the one index that I’m most concerned about, the Small Cap.
So how do I read this chart when I want to know something. That first box on the first row is the minute and it tells me live at the minute what the market is doing. Then as you move across this first row, the 5 and 15 minute charts just give you a bigger view at the current flow for the day and the most recent days. The 5 minute chart it is easy to see that Tuesday we collapsed for the day and then the rest of the week, price did nothing. the 15 minute chart gives you your first good look that the last two weeks have been trending down and is not showing signs that we are done yet.
On the Second row, first chart is the daily and is the one you guys see most often. It is easy to see that recently we have rolled over and even fired a couple of sell signals. See that dotted green uptrend line? Look at the monthly chart at the far right, second row and you can see how that line was drawn. That dotted line is just an intermediate uptrend line and the solid green line on the monthly is the primary uptrend line. So how do I use this information. On the daily chart I use the red count back line, CBL, that moves up in an uptrend to help give me warnings of trend reversals. I do not use them as a single event to sell. The primary blue 50 day moving average. When price dips below, it is another signal of trend reversal. Finally my uptrend and downtrend lines. When price crosses one of these, it’s another sign of trend change. Short term trend lines are not as important as intermediate and primary trend lines. The last two are very important and are a sign of very bad things to come or very good things to come.
I’m sure I have confused the hell out of you at this point, but the point is fear. Are the current moves in the stock market creating fear or opportunities? Each person is different on how they see things. But if you look at the last chart on the last row it’s the monthly and the sell signal is not even close to firing. The daily and minute charts create fear. We still have a a lot more room for lower prices before the Small actually has a daily sell. So I use these minute and daily charts just to get a heads up that things might be changing.
Things have cooled off here on the S&P 500. It appears to me that we have started forming another bull flag. Most times when this happens, we break out higher in the same direction of the primary trend. The CBL and 50 are holding but it is very tight and a if prices fall anymore, we will likely get a double sell warning. I am just a little concerned that trend might be shifting, but only time will confirm this gut feeling. The monthly disagrees with my gut.
The Small Cap is firing sell warnings but we still have until price falls below the green uptrend line until it is officially a sell on my charts. The other way to look at this chart is that a bull flag is forming and the normal break out is higher and follow the current trend. So we watch.
The International doesn’t even look like it has been phased by the Small Cap and S&P 500 recent pull backs. Those 2 short term uptrend lines are holding and prices seems to be laddering up weekly. Let’s hope that for once, the International can lead this market higher.
Here is a classic example why I gave up trying to follow the daily charts for making moves in my TSP account. Bonds fired another buy signal Tuesday and confirmed it on Wednesday. How many has this been in recent weeks? I’m pretty sure it was 2 and both failed. What does the monthly say today for Bonds?
Sell, Sell, Sell. Current price is $108.36 and buy price is $109.5. Looks like it’s very close when you look at the raw price only, but bonds do not move much. So a 1% move up in price would fire a buy signal monthly with bonds. I do believe we have hit bottom here, but is it beginning an uptrend? To early to tell.
Conclusion: Invest using long term trends and not short term fear when it comes to your retirement account. If you want to make short term moves, open an account at TD Ameritrade and start buying stocks. You will find out really quickly just how tricky this game can be.
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