A look at the 10 minute chart of Friday's trading action shows that the S&P 500 (SPX) spent a few brief, golden moments above the critical 1060 level during the first 10 minutes of trading, only to fall back during the second 10 minute candle.
Later prices tried three more times to get above this magic 1060 number. All three attempts failed, leaving "tails up" on the 10 minute candles. By the end of the day, a potential reversal daily candle was left behind on the chart, forming yet again on an employment number. This is becoming routine.
I still think the SPX is topping out a fractal pattern, and a decline of significance (a "down fractal") is looming. There is again evidence of exhaustion on the upside, and the main question of whether a decline gets any traction is whether or not a selling catalyst shows up. I contend that when a widely-recognized "spark of fear" hits this astonishingly complacent market, pure havoc will result.
But until that "obvious" event hits, it's going to continue to be a difficult market to trade, except in the shortest possible time-frames. Really, at this particular point in time there just aren't that many decisions being made day-to-day by market participants. We won't really get a big reaction down until some more participants come in, forced into the market by some galvanizing event.
By far the majority of positions at risk now are on the long side. It's pretty safe to say that nearly all the bears have been forced by the market to cover. Granted, there are still short-term traders trying to catch a top tick here, and that's fueling the quick spikes up. There's also been a pretty good measure of liquidity pumped in by Overnight "Repo's" by the Fed, helping to bump the market along on a fresh supply of money. But last week, for the first time in a long time -- liquidity was actually drained for a few days on these Repo's (thank you to piraz.com for this info). That can be a harbinger of market weakness, and warrants close scrutiny now.
Interestingly, since November 3rd there hasn't been any trendy price movement on my 150 minute SPX chart. The fractal dimension of this chart has been showing pure noise and congestion since that last white candle up on November 3rd.
This chart now shows a good amount of potential energy ready to be released, with prices hovering right at the 20-period moving average. The good trends almost always start from the 20 period moving average. So the next trend that can last through the first 2 1/2 hours of trading ought to be a pretty good one, lasting 3 to 5 days before flaming out. That's what this chart is telling me.
With the VIX and VXO at multi-year lows, personally I only have an appetite to speculate on the downtrends at this point, and only when everything is all lined up -- but I think I may be in the minority on that one.
Sentiment Dashboard
by Adam Oliensis
SENTIMENT TANK: Filled 0.4 points to 1.9% full of negative sentiment.
SHORT-TERM: Closed Friday in neutral. Was moving into an advance phase until the last hour or two of the session when the market sold off. Could be primed to roll into a decline phase on Monday.
MID-TERM: Progressed 1 point on the advance side to 96% with Confidence at a bullish 2 (out of 7).
LONG-TERM: Moved into Neutral at 94/6 with Confidence shading bullish on the basis of positive earnings and economic news as well as constructive seasonality.
BOTTOM LINE: Sentiment is certainly overbought enough for a market selloff. But that's been the case for some time. While the indices could continue to grind higher, the potential for explosive action continues to be to the downside.
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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