Updating the charts we have used to gauge October’s little bearish ripple and projected bounce back.
Funny thing about the market; I’ve had this potential 17,500 target on the Dow since early in the year as it formed a bullish Ascending Triangle on this weekly chart we review often in NFTRH. Then the recent mini correction dropped it hard and I felt a little twinge of embarrassment about this chart. Now? Not so much.
This is what happens when market bounces extend off of corrections that came about amidst b/s like the Middle East and Russia/Ukraine tension (i.e. things that have nothing to do with the US stock market other than resetting over bullish sentiment to a healthier state). These bounce backs tend to fix technicals. The market can turn and drop tomorrow, but as of 3:00 on Tuesday, the Dow’s weekly technicals (if you discount MACD) are intact and targeting 17,500.
Yesterday HUI did exactly what we asked it to do in order to remain normal to the current plan. It dropped into the 224’s, filled the gap and has not made a lower low to the last green arrow. So it remains in a baby uptrend. I would not get too concerned about reading a rising wedge into a 30 minute chart, but it is inserted regardless to again play Devil’s Advocate.
The ‘bounce’ has been more powerful than I thought it might, bringing the prospect of the next up phase – indeed a potential melt up phase – into the picture. But one leader has been negatively diverging the rally of the last week…
There is stuff going around about the old as the hills ‘3 Peaks and a Domed House’ on the DJIA. Unfortunately, I have found that to be of nearly as little value for the bear side as old favorites the ‘Jaws of Death’ and my ATF, the ‘Death Cross’ of MA 50’s below MA 200’s.
What I may find constructive for the bear side however is that the market is celebrating an industrial production data release into FOMC. The most bullish scenario would have been for the market to continue declining to clear the pipes for a strong Santa rally, at which point I’d have added more long positions. Watch the red trend line.
Now instead, I am having thoughts of shorting. Just thoughts at the moment, mind you.
Dow should not make a lower low or that would be err… bad. I just got done managing a similar (yet oh so different) situation on the HUI in the previous update.
For the Debt Theater Kabuki Dance to be like all the other ultimately bullish sentiment events of the last year, these markets need to get it together quickly. They were due for a correction but I’d be more comfortable for it to have been ‘organic’ as the most naive of bulls like to call our US economy, rather than having this stinking debt mess at center stage.
I hope the market finds support here because I unloaded my SPY puts but still have some longs. I would like to see the Dow bounce here at the 62% Fib retrace and visual support in order to get bearish again.
I think eventually this pig will go to the 200 day moving averages because lazy thinkers and various other dumb money needs to be punished. First, let’s get a bump to the 50 day averages.