Monday put up a giant white candle on the daily chart. This is either one of the bigger upside fakeouts in a while -- which I think it is -- or the market is just going to power over SPX 1060 and not look back.
The key thing if this is the real deal to the upside will be follow-through on Monday's upside action. If you are on the lookout for continuation after a big white candle, you ideally don't even want to see that candle "eaten into" by subsequent candles. It's acceptable to see a little foray into a big white candle which is quickly rebuffed -- leaving a small tail down -- but if you're looking for more upside you don't want to see any erosion of that candle. For all you fellow chart maniacs out there, go check that out -- it's a pretty important observation. I've found that essentially holds true for different time-frames as well.
A big white candle in and of itself means there were some sizeable wrong-way short bets that got flushed -- a very common occurrence in a bear market. But it's one thing to flush short-term bets, and it's another thing to initiate a bigger uptrend. That's where the follow-through part comes in.
So Tuesday is now important, such as it is, with the Holiday week and all. It's doubtful there's enough energy to put up another white candle on the chart. The hourly fractal dimension is at 32, which is a spot where trends tend to stop cold.
We're also at the critical 1052 handle on the S&P 500. That's the 61.8% retracement of the swift decline from that recent pop over 1060. If the SPX rallies up and over that 1052 level convincingly, then talk of an incipient downtrend here will have to be shelved.
The real story here is this is a market that requires patience. Think about it for a second. There hasn't really been much going on since that spike high to SPX 1015 in mid-June -- over five months ago! Since then, the SPX has tacked on a grand total of 3.6%.
Yet so much time elapsing without a collapse has everybody convinced this is a new bull market, with Greenspan's Fed charting us on a course to economic nirvana. We'll see about that. 3.6% over 5 months doesn't seem like justification to get everybody so fired up, and it seems like a meager return when you consider how inherently risky it is to be part of a major bullish consensus.
Sentiment Dashboard
by Adam Oliensis
SENTIMENT TANK: Drained by 5 points to 6% full of negative sentiment.
SHORT-TERM: In a strong Advance phase. This Advance is more powerful than we anticipated it would be. Let's see about its sustainability.
MID-TERM: Progressed 2 points on the Decline side to 69% but with Confidence tugging strongly in the bullish direction, moving up 2 points to a bullish 2. The needle had been advancing 7-10 points at a time. It has now decelerated and is ripening to turn into an Advance phase..
LONG-TERM: Progressed 1 point to 21% on the Decline side, but Confidence moved a very strong 3 points to a bullish 3.
BOTTOM LINE: The market kicked off the short-term advance (which we had anticipated) but with a stronger leg than we believed it would. We could well see a nominal new high on the SPX with a run to 1070-1080. There's enough fuel in the tank for that. But there's probably not enough fuel to go much higher than that before another down leg ensues, and the tank fills up again at least somewhat.
Absent some surprisingly bad economic or geopolitical news seasonal strength is likely to prevail through Tuesday. Since 1962 the SPX has risen on November 25 68% of the time. When the index is up it rises by an average of 0.49%. The positive bias continues through the 26th on which date the index rises 75% of the time, though the magnitude of the average rise declines.
Se não receio o erro é porque estou sempre pronto a corrigi-lo
There's no bull side and no bear side. JUST THE RIGHT SIDE!
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