Hope all had a good Christmas and a happy new years
Now on to the market!
After months of enduring one sell signal after another, we can finally call a bull trading signal and suggest traders ought to take the appropriate stance. Considering the seasonality, the poor investor sentiment and the anticipation of a new stronger leadership (along with billions of dollars of stimulus) one should not be surprised to see a tradable bottom come in.
Having said that, this can only be viewed as a short term bullish signal, the medium term down trend is very well in place and a rally in the short term shall only take us back into the actual down trend channel. As well, the lows of fall ($73.74) were never really tested in earnest leading me to believe this level will need to be retested again in the future. It may take months, maybe even years, but this level shall be tested again.
With the market (and the SPY in particular) closing above the previously stated upper trading range mark ($92.38) the market confirmed a short term bull flag formation and now has an initial upside price object of $103.44. Coincidentally, we have the gap from September to be filled near this level, and the bottom of the down trend channel rests near this level as well. Adding to the bullish case, the bearish spread between the 13EMA and the 30SMA is very wide and while this in itself isn't a reason for the market to move higher, this relationship should come back into normal levels. And lastly, the steep down trend channel in place since the gap lower in September has been broken and now represents support rather than resistance. Again, this in itself doesn't suggest higher prices, butit does suggest support should the market need to pull back.
Put it all together and I think we have something quit normal. Seasonality, sentiment and short term euphoria are all contributing to an oversold rally within a long term bear market. For those that make a living from the stock market, make your money now because once the rally is over, we will probably head right back into doing nothing.
That's all for this week,
Brian Beamish FCSI
No comments:
Post a Comment