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Where the Markets Are Headed
Latest Activity: Feb 23
Fibonnaci in Nature
Started by Terry H. Last reply by Terry H Nov 5, 2013.
Started by Terry H. Last reply by Brian Augustine Nov 5, 2013.
Started by Terry H. Last reply by Terry H May 7, 2013.
Started by Terry H. Last reply by Terry H Apr 18, 2013.
The stock market rally that began on February 3rd continues to persist, almost daily. The Standard & Poors 500 Index ($SPX) has only had two down days in that time. Even so, there is some question as to whether it has the strength to overcome what is stubborn resistance at 1850.
Equity-only put-call ratios gave appropriate sell signals in January, but once the stock market turned higher, these ratios just moved sideways (see vertical green lines on Figures 2 and 3). This is indicative of somewhat heavy put buying during the rally.
Market breadth oscillators continue to remain overbought and on buy signals.
A $VIX close above 16 would be a close above the moving average, and that would be negative. Otherwise, the market can continue to rise while $VIX bounces around at low levels.
In summary, $SPX has undergone a 100-point round trip down and up in a short period of time. This has confused both humans and technical indicators. But it seems certain that 1850 will be an inflection point -- that is, the market will move away from this level with some force.
Click here to view this week's charts
If you want to understand why the Fed's monetary policy has not been working, read this paper read last year at the San Francisco Fed:
DJIA Inflation Adjusted Chart since 1982 to Oct 23, 2013.
I'm bullish on the market into year end - Gold is looking strong again as well!
A thorough talk on EWI's interpretation of where we are in all markets and the economy and why from a historical perspective with charts, and an explanation of why they didn't think the US stock market would go this high.http://www.elliottwave.com/club/analyst-videos/ewi/steve-hochberg-1...
I think it's collusion of the big boys over a single malt to gap up that decisively in the AM and run it down that forcefully thereafter. There's news and then there's their use of news. But at least we see it coming now.
Now that was the second leg down after the retest back up. But what amazes me about that downside move is today's candle popped all the way back to the top of the Dow's resistance. Yet, by end of day, it bottomed in a manner that retraced the entire topping from January 25 through February.
That's a deep question James. What I was implying was that Terry and Anmol were inferring (and it depends on your timeframe) that the market is perilously close to a top and that we may be in the midst of a change of trend, and a significant correction. I was saying that in order to top, we usually make a second push up before fully wiping out, as the medium-term up momentum by definition has the bulls confident and bears a bit forlorn, albeit ready to rampage. Now, if the bears go short too quickly, they run the risk that the first pullback is bought too heavily and they get squeezed into oblivion, in fact even propagating a continuation of the uptrend. (And that latter point is a counter-argurment to Anmol's on the relevance of low volume, which can be an upside trigger, not only a downside indicator).
Conclusion, if you are smart like Terry you might catch the first big leg down on a count. But my play is to wait for the retrace back up after that first leg down. And then, only after a failure of support, catch the second leg down of equal length of that first leg -- should it occur. Or, better yet get in once the trend is more established, over more days, in a spot where there is a big pocket between support/resistance lines.
So, in this instance, the trend has in fact been up, not down. And assuming we have topped is a bit too cute for me. I like to be in on the actual trend and neither catch knives nor call tops. But we would have to discuss this more practically, as it depends on how we trade exactly. But my simple point was that trends are long enough that we usually can catch enough of the curve without having to guess bottoms and tops, particularly because there often is some boomerang action at those points, which can be both very lucky and very unlucky.
Rhee, for a noobie like me, I was wondering if you could possibly post a current stock chart that shows the sweet spot you are talking about. I feel like I have a good number of tools at my disposal to make an informed decision but I'm not quite there in terms of using them correctly. I understand that "the trend is your friend" and not to "catch a falling knife" but I'm still having some trouble making wise decisions. Any insight would be appreciated. Thank you!
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