Below is the chart I’m watching now. Today we have an indecision doji with perhaps a bottoming tail.I’ve redrawn the lower trend line, cloned it, and placed it along a couple of tops to create a revised rising price channel. I feel that this is valid because we do not have a lower low. Should $SPX drop below 1325 any time before it rises above 1380, then I will change the chart to reflect a down trend. We could also be looking at a Bull Flag pattern, just like the pattern that we had from the 3rd through the 12th.
$NYSI has started to roll over and may give the first part of a new sell signal by Friday’s close. The fact that $NYSI is rolling over is a negative for the market and so I’m expecting $SPX to drop below 1325 sooner rather than later. Also, while the market kinda’ rallied today, $TRIN closed at 1.19 and volume going into declining issues was slightly greater than volume going into advancing issues. So while the green day on the $INDU and $NYA looked good, it didn’t smell good. Also, transports, which have been struggling all year, are now back in the same place they were on December 19th 2011 so they’re negative for the year and then some.
Recent market action just does not inspire confidence, at least for me. Maybe the market will bounce, like it has after every recent and 4-5 day pull back, maybe not. Until the market gives a clear signal one way or the other then cash is king and market is best left to adept day traders, IMHO, of course.
Edit: Just wanted to point out that each time since early June that the 5,3,3 stochastic has tagged or dropped below 20 the market has bounced. Basically we’re there so if there’s going to be a bounce it should start tomorrow. I don’t know it the market will bounce and in fact I’m doubtful, but the opportunity is there.
Click on the chart for a larger view.
As always, be careful. If you decide to play, keep position sizes small and don’t turn your back on the market because only the paranoid survive.