There are two types of traders that continue to watch this market from the cheap seats. That would be those who trade the daily charts only when the ADX line manages to cross up through the -DI line, and those who trade using the weekly charts.
Back in December 0f 2010, with the $SPX around 1180, the ADX line crossed up through the falling -DI line in a ‘buy’ confirmation. Less than two months later, with the $SPX above 1300, the ADX line fell and crossed back down through the +DI line generating a ‘sell’ signal per this method. The ADX line and the DI lines have waffled back and forth since then but have yet to give a fresh ‘buy’ signal. Traders following this strategy would be mostly if not totally in cash.
For weekly chart traders, a fresh entry was generated back in late October of 2010 when the short term MA’s began to cross up through one another with the $SPX trading close to 1100. These traders would have held until late July of this year when the short term MA’s began to cross down through one another at a time when the $SPX was trading right around 1300. Traders who employ this strategy would also be mostly or totally in cash waiting for the next ‘buy’ signal.
And we’re not there yet.
Daily chart of $SPX with back to back inverted hammers. I don’t know what to make of this. Indecision? Triple witching BS? Mix-n-match? One thing I do know is that the falling trend line continues to exert its authority. At the same time, $SPX has now closed below all the MA’s on this chart for the past three sessions. The 5,3,3 Sto is now turning up and so there is a chance that the bounce that began this past Thursday will continue, or famous last words.
Weekly chart showing $SPX moving toward apex of symmetrical triangle. It could take 2-3 weeks for $SPX to hit the apex and break one way or another. In the meantime there is always the chance that $SPX may need to test the bottom line which would be just below 1200 now.
$SPX rose 10pts in the previous week and then fell 35pts this past week on higher volume. $SPX was off by 2.83% last week and is now off 27pts and 2.19% on the month.
This does not look like a happy chart and even if we do rally next week, it will still take several good weeks to turn the weekly around. It just seems to me that the market is moving without much interest, that new money is avoiding the markets for now and until that changes then we’re just going to keep headed sideways to down.
There is the expectation that pre-holiday trading will be done on light volume and will favor the upside, but that was not the case going into Thanksgiving.
The paranoid will survive this market while many of the froth-mouthed bulls and bears will fall by the way.
GL in the week ahead.