This week was the first time in a long time where every index had a negative week. This uptrend has been running for a long time and it has been a good one for all us that have been following the monthly moves. We have been continuously in the C and S since March 2016 and have been running the I-fund since July 2017. We did have an index this week reconfirm it’s negative down trend. We also need to have a 4 to 5% pullback to even fire a sell signal on the monthly’s. So it’s a little early yet to tell if this is the pull back sign.
To look at the price structure of the C-fund above, it just looks like a normal step in the ladder climbing higher. Volatility is starting to put a little pressure on the index and that is negative. The DMI looks like it will turn negative next week for the first time since the end of August. We need a lot more information from price before we can tell if trend is changing. So we ride and watch.
The Small Cap daily chart is the one index we have that is starting to scream that a reversal is imminent. Why? We had a bull flag breakout 16 days ago and it has for the most part failed. It was suppose to be a 70 point move to the high side. Until Wednesday everything was ok, but at that point, price started breaking down below support. Now price is sitting right on top of the first sell warning level at the CBL. Price is also closing in on the 50 day ma. That would be the second sell level. The Short term uptrend line, the dotted green line, also failed. I did not expect that trend to hold long because it was to steep. The long dashed line in green is the final sell line of the daily chart, so we have a bit of a buffer. I do believe that if price continues to fall next week, that we could see a real roll over that would drag the rest of the market indexes with it. Keep in mind, monthly we still need a 4% drop from todays price to fire a sell. We watch carefully and ride it.
The International looks more closely to that of the S&P 500 or C-fund chart. It just looks like we are making steady steps higher. The volatility is negative and the DMI is negative. These are a few indicators that are whispering that a pull back is possible. No sell warnings here either so we watch and ride.
Bonds was looking like it was going to reverse the current downtrend, but come Thursday and Friday that fell apart. The down trend line will be adjusted to reflect the last pivot low, but nothing has changed. Bonds are still a sell and still heading lower. On top of that, the weekly chart Friday fired a sell signal. So now all three charts, daily, weekly, and monthly are a sell. If the support level that I drew in yellow doesn’t hold next week, it will also confirm that the bottom has not been reached yet.
Conclusion: Yes, it does appear that the markets are either digesting all their gains or prices have finally reached a level where profit taking is going to begin. Prices cannot go up forever, so a good 4 to 5% pull back is normal in a strong market. Just don’t gut check out yet. No one can predict the future. All I can do is read the past and try to make some sense of what it might mean in the future. I still will depend on the monthly charts to make the final call to sell.
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