I posted a few quick updates on Facebook this past week just to make sure that my followers were kept up to date on anything plus or minus that is changing. The Small Cap and the international had the most drama with sell warnings being fired and then canceled. How should you the reader take and use this information? Understanding my methods and knowing ultimately we do nothing unless the monthly charts fire the sell or buy, it’s just a heads up that momentum of price might be changing in one direction or the other. Stay calm, consume it, wait and watch. It is a heads up that maybe by the end of the month you should not miss that particular update because there might be a change in our position.
Here is another thing you should also use as a tool to stay calm. These daily chart reports I put out each weekend have a very big clue at the bottom of each chart. If you see the green buy icons for the daily, weekly, and monthly charts, you should be in. If you see two greens and a red, it should make you think pause and maybe things are changing. If you see three red sells, daily, weekly, and monthly, you should be out.
Ultimately, I use the monthly moves to stay mechanical so I can make unemotional moves in and out of the individual indexes.
The S&P 500 hardly flinched this past week. The slide in prices approached the sell CBL line, created a new higher pivot low. This is a normal thing with a healthy uptrend. The 50 day moving average hardly changed it’s uphill angle. The only negatives on this chart are the volatility is high and the DMI is sloppy. Everything on the S&P looks fine at this moment in time.
The Small Cap daily had the most drama this week. Price broke down below the red CBL line, which is sell warning 1. Then price closed one day below the 50 day moving average , which fired sell warning 2. Thursday and Friday, price bounce hard to the upside and canceled all warnings. This also put us right back in the middle of the consolidation channel. It also puts us right back in the middle of not having a clue which direction this new move is going to go. Also remember from a a few weeks ago, we had a bull flag breakout that indicated that we were heading 70 points higher. Lot’s of data here to consume and attempt to make a decision with, so using the monthly moves once again proves, that following them has a lot less drama. Following the dailies for me is just fun but mind racking at the same time. Knowing that we are still in an uptrend, also knowing that we had the bull flag breakout, and also knowing we just formed a pivot low, my best guess is we are still heading higher. We watch and ride.
The International Daily also fired sell warning 1 and 2 this week. Since my CBL sell line and the 50 day moving average have merged into one spot, it is not that surprising here. The final sell signal on the daily is still the green uptrend line which today is around $66. So there is a lot of room today for lower prices before we turn totally negative here. Volatility and DMI are negative, so it would not be a big surprise to see lower prices here. Here is one more little concern and might be hard to understand. That new pivot low is positive only if price does not reverse and end up lower than that point. If price goes lower, it will indicate that a new down trend has begun. This is also true with the Small Cap, but it is not as obvious. We watch and ride.
Bonds are beginning to look like there might be a bottom here. Price could continue higher from here, but what I expect to happen is for price to once again go lower and test that yellow support line. Price has already bounced up from here once and if it happens again, this is very good signal that we have reach a low. Would I take this signal to jump in? Nope, it is just information once again that trend might be changing. But, if you are invested in any of the L-funds, this is good for you.
Conclusion: Don’t let last week scare you. This is when you really, really need to turn off the news. This is also when you really need to turn off what your buddy is bragging about how they got in or out at just the right time. 99% of the time, if you ask that person to show you in their account the proof of the black and white move, they will not show you and or give some other excuse. Don’t listen or fall for it. Use the mechanical moves with no emotion and you will be able to sleep. I have been saying for a few weeks now that things might be changing and lower prices might be in our future. But, when that actually happens, no one can predict. W could could up another 10% before the pull back happens, so why not wait for a monthly sell signal?
Next week is Thanksgiving week, so the markets could be slow without much movement.
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