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Friday, November 15, 2013

Friday Weekly Charts

 As we approach the moment of truth, we shall see if the market reverses when it hits R1. Judging by past precendent from this year, it is a tough call, because half the time, the pivot points didn't even slow down the advance, let alone stop it. However, longer term precedent suggests that we may be in for a reversal as we hit R1, and may be in for a pretty good down draft. However, that is just a guess at this point: the market is really not showing any bearish signs right now. If anything, it appears that the buying is accelerating.

The weekly chart has even fewer signs for the bears to grasp, as this is in a clearly accelerating up trend. About the only thing they can look for here is a blow off top, where the market goes parabolic. That can be very painful to try to short. If we are about to enter a correction, it isn't showing here.

The Nasdaq has weakened in he short term, but in the long term, it looks just fine. One hing I might point out is how high above the 40 week average it is; that may be grasping at straws, but it does not normally get this high for very long.
The Dow industrials have begun to lead here, which would normally be a bearish sign as it means the market is going defensive. That may be true to a degree, but so far, this looks more rotational than defensive.

The story of 2013 (other than the Obamacare debacle) is he rise of the Transports. They had a seeminglly unsustainable rise early this year, cooled off a bit mid year, and are taking off again late in the year. Why? Beats the hell out of me.
The Russell 2000 is now lagging pretty badly, and is the chief source of my developing bearishness. The trouble is, a lagging Russell usually leads to a pretty hefy correction, but that can take several months to develop, so we may be looking at mid 2014 before this market really corrects. For a chronically depressed perma bear like me, that is unthinkable.

The market seems to have an unsustainable trajectory going on right now, but we don;t know if that means unsustainable in the short, medium, or long term. Overbought markets can stay overbought for a long time, and ridiculously high valuations can stay ridiculous for a long time. I refer to to the year 1999.

I will have the new highs update shortly.

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