A nice rally was quickly erased last week on the Goldman Sach’s alleged fraud. In the larger picture we have not broken any trend line support and continue in a nice uptrend. However, the extremely large volume on Friday is concerning. We must remember that it is not the news itself that is important; it is the market’s reaction to the news that matters. The DOW remains over 11,000 and we remain in our trend, no need to overreact.
We saw similar price action in the markets this week as compared to last week, only instead of doji bars, we had large body candles. The lower volume is a concern, but we will continue to trade the setups in the market until they fail and the trend reverses.
Another week of daily doji candles, however we are moving slowly higher. Look to the support/resistance levels as actionable points. Use Monday (or the first day of the week) to establish the mood/trend for the week.
A sideways and choppy market last week as we closed slightly up for the week. After the amazing 14-days up in a row on the SPY it could be assumed that bulls would like to take some profits and await the next move. Remain patient and objective. Choppy weeks can decimate an account so if you’ve stuck to your plan for the week then pat yourself on the back.
Last week’s write-up pretty much sums up this past week’s action. We broke above the 61.8% on the prior retracement so if we were to reverse lower it should happen on Monday or Tuesday. If we move higher this week we would be looking for move to prior highs over the next few weeks.
Looking at the markets in terms of supply and demand is one of the most common and simplified ways of analysis. Identifying where the market is “valued” describes balance. Looking at the weekly chart of the S&P500 we notice two very important things. 1. The prior week’s candle is a doji bar or spinning top as talked about in Japanese Candlestick Charting Techniques by Steve Nison. This is a potential reversal bar, with confirmation, in this case, a close above…
In last week’s market forecast we talked about a target for the S&P of $1030. We came down to the $1045 level and while Friday’s price action resulted in a large bottoming tail hammer, we feel that after a small bounce we should continue lower. We also saw the Vix spike above the prior swing highs, which we talked about last week as well.
With mixed earnings, positive GDP growth, the President’s State of the Union Address and a slew of other economic data the markets continue to grind lower. The Vix remains at the top of its channel poised to breakout in the next few weeks.