Strongerhead Weekly Financial Market Analysis 04 Feb 2013

Is Dow at 14000 considered too high?

There’s no high price or low price. Only the right price. Because at 14000, prices can still go higher and higher. If so, you would be kicking your own butt for not buying at 14000. On the flip side, if you have bought at 14000 and prices begin to decline, you would be kicking your own butt for buying at the high. So the question would be, is this the right price? Let’s take a look at the charts.

Monthly trend is up. Feb is welcomed by the bulls. As long as EMA does not change its tide, prices should continue to go higher. I’m watching RSI as a gauge to watch over the temperature. Just to avoid getting stuck in an overcooked situation.

On the weekly, prices & RSI have stayed overbought at the same time only once without pull back (the beginning of its recovery in 2009). Let’s take 14000 as the resistance that now forms as support. If prices do not stay above 14000, don’t let your longs turned into losses, and forget to short. But if it does, buckle your seat belt on your longs.

On the daily, there’s still some room for bulls to run. But I cannot denied that daily is in an overbought state too.

VIX (fear index) instead of $13.15, $14 is showing resistance. Prices went above $14 and gap down on Fri. Both weekly and daily at fair value, not oversold or overbought. Should continue to range until otherwise.

All three time frames show that prices are in overbought zone. The market is looking to stretch its limit to the extreme end of its overbought zone. The best way to position yourself is to be insured or hedged, giving slightly more benefit of the doubts to the bulls.

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NOTE: All information provided “as is” for informational purposes only, not intended for trading purposes or advice.