After the tail has shown up on 5 Apr (more infor on last week’s analysis http://strongerhead.com/strongerhead-weekly-financial-market-analysis-8-apr-2013/), prices rallied throughout the first 4 days of the trading week, only to take a breather 12 Apr. Let’s ask the charts how long could this rally last?
No change in monthly trend (UP – chart not shown). Dow is in a deeper overbought condition compared to S&P on the weekly. In any case, both charts are still UP. Daily chart is telling us that the trend is UP, and has once again entered into overbought zone.
VIX (fear index) weekly is down. VIX daily is at the bottom of the green box I had drawn. This is a sign that fear is now “undervalue”.
Summary:
Mid term view:
Monthly trend UP, in overbought zone.
Weekly trend UP, in overbought zone.
Daily trend UP, in overbought zone.
When all three time frames are in overbought zone, we are in very bullish territory. But with the increase risk of pullbacks, this is a time to profit take, instead of taking on new long positions.
Short term view:
Since mid term view is up, we can only long or stand aside. But we do not buy when things are in overbought zone. Only buy when we can catch a good discount.
VIX daily is sitting in oversold zone. VIX has the habit of rejecting from oversold zone. Which mean this week, there’s possibility of a pull back.
Anything could happen. So here’s just a guess on what might happened this week. The bullish sentiment should continue in the first few days to trap those who needed the stocks badly. The pull back would happen the shake weak holders off, before rally resumes.
Cheers
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NOTE: All information provided “as is” for informational purposes only, not intended for trading purposes or advice.
