WEEKLY MARKET UPDATE

Wow, what a strong up week!  So much for the news dictating what the market "should" do.  Unless you've been living in a cave you no doubt know the shenanigans going on in Washington.  Logic would tell you when the news is bad and the threat of another US credit downgrade would cause the market to fall.  Instead, the market brushed that off this past week and rallied to all time highs at 174.51 (see weekly spy chart).  The market is now above the September high of 173.60 and appears to be headed even higher.

CONCLUSION

As I've stated ad nauseam in prior posts I would still be a bit cautious about going "all in" if you've been 100% out due to overbought nature of the market.  However, I do think it's prudent to slowly commit more capital as the market proves it can move higher.  This next week is a very critical week as it can either confirm that this week was a true breakout or a false breakout.  More on that next week.  Be blessed and have a great weekend.

WEEKLY MARKET UPDATE

The long term trend remains up.  Just as important, this week the intermediate term trend shifted up as well. Below is a chart of the weekly SPY.  On Monday of this past week the market opened lower than where it closed the previous Friday.  Early in the week the market sold off but beginning on Wednesday the market started to rally and had a very strong up day on Friday of this week to close above last Friday's close.  This is VERY bullish price action and was also confirmed by the sentiment indicator that I look at.

CONCLUSION

Based on this week's price action the high of 173.60 is a high probability target.  However, I think that caution is warranted.  As bullish as this past week's price action was; the market is still very overextended to the up side.  If I were out of the market 100% up until now, I would "dip my toes" back into the market with a small position and then monitor what happens when the September high of 173.60 is reached.  Have a great weekend.

WEEKLY MARKET UPDATE

The long term trend remains up but the intermediate term outlook remains muddy.  On Monday of this week the market opened much lower than where it closed on the previous Friday.  While the market closed higher today than where it opened on Monday, it still closed lower than the previous Friday's close.

CONCLUSION

This last week's price action makes it really difficult to tell which direction the market may take on an intermediate term basis.  I stand by the position that I've taken in recent weeks until the market can prove it can break out to new highs.  By almost every metric I look at the market is overstretched to the up side.  I would tend to be more conservative than aggressive at this juncture.

WEEKLY MARKET UPDATE

While the long term trend remains up, the intermediate term picture remains unclear.  I stated last week that if this week's price action declined below last week's low, that there would be a high probability of a further decline into one of the support areas below.  As you can clearly see on the weekly SPY chart; that happened.  The most immediate support level is the August low at 163, then the 40 week moving average at 159.76, then the 156-157.50 level.

CONCLUSION

While anything can happen in the market, after last week's price action, now is not a good time to be establishing a new position in the market if you've been 100% on the sidelines.  And IMHO it's a good idea to either scale out of your positions or hedge if you've had most of your investment capital in the market. Have a great weekend!

WEEKLY MARKET UPDATE

This was a very interesting week.  While the long term trend remains firmly up, this week's price and volume action indicated a mighty battle between the bulls and the bears.  Take a look at the weekly SPY chart.  The market opened higher on Monday than where it closed the previous Friday.  Early in the week it rallied above the high made in August at 170.97.  But later in the week it sold off to close not only lower than the August high, but also lower than where it opened on Monday.  Now take a look at the volume this week compared to the two previous weeks.  It was much larger.  This combination of technical factors tells me that if early next week prices decline below 170 that there is a high probability of a further decline to at least the 163 level; perhaps even lower to the 40 week moving average at 159 or the next lower support level of 155.75 - 157.50.

CONCLUSION

While the long term trend remains up and the last two weeks have rallied strongly, this strikes me as particularly risky time to consider getting back into the market if you have been 100% in cash.  I say that not only due to the factors I've already discussed; but when you add the fact that prices are stretched historically high to the up side, the probability of a negative expectancy is higher than a positive expectancy over the intermediate term.  Have a great weekend.

 

WEEKLY MARKET UPDATE

The long term trend remains up.  As you can see from the weekly SPY chart the week closed up strongly from the previous week.  While short term this is bullish I would still call the intermediate term trend undecided or neutral.  For the past four months the market has been chopping up and down between the upper and lower green lines.

CONCLUSION

Based on the most recent price action aggressive traders may wish to re-establish buy positions in the anticipation that the market will continue the up trend if it breaks out above the upper green line (August high).  Personally, I would not establish any new buys until the market either breaks out above these highs with authority.

WEEKLY MARKET UPDATE

The long term trend remains up.  As you can see on the weekly SPY chart, the week closed higher than last week but the price action was not particularly convincing.  Once again the sentiment indicator that I look at suggests that a short term bottom may be in place.  But this is the only indicator that I look at that is pointing to an intermediate term rally.  The rest suggest a further decline or that the market remains stuck in between the upper and lower green lines.  If you recall last week I showed you an indicator that I use that helps me to identify when the market is "overstretched" to the up side and is due for an intermediate term correction. Note the previous three times these conditions occurred the market corrected at minimum to the 40 week moving average (white line) before resuming the long term trend.  In my view it is clear that there is a major battle going on between the bulls and the bears.  I still feel there's a better than 50/50 chance the market will decline further towards the 40 week moving average.  But anything can happen.  I'll keep an eye on things. Have a great weekend.