Last week’s homework, we mentioned that it is time to switch sides and favour the bulls. Which was why I had closed off my shorts and went net long. Let’s take a look at the strength of the bulls in the X’mas week ahead.
Long term trend is UP. No correction happening yet on the long term perspective. With year coming to an end, Dec is looking to close on a bullish note. How bullish can it get, let’s take a look at the shorter term view for clues.
Last week, we mentioned that midterm view is on the verge of breaking down but expect a false alarm from the bears. Bulls has set the trap, and it definitely looks like it now unless it broke back down below its first line of support. Currently, midterm trend is back to UP from neutral. Looking strong, nothing bearish with more room to go before it is overheated again.
The short term trend has turned from down to UP. Last week, it was mentioned that RSI suggested a possible rally which has happened. And for the rally to be sustainable, it must break and stays above the first lie of support. Which both Dow and S&P is doing that now. All looking good, except that on last Friday closing, prices rejected the high as it breaks through the top of its price envelop. Not that it is suggesting a reversal. But it might means a cool off from overbought is needed before the market could go further.
VIX (Fear index) mid-term price is now on neutral from up. Short term direct has changed from Up to down. Jul-Aug pattern has done us well so far. Usually, i do not chase the pattern for a long period of time. But if we want to use the pattern as a guide still, there’s more room for VIX to go down but in the short term, a big spike is coming. If you had long, don’t let your profit turn into red.
Long term (monthly chart):
Mid term (weekly chart):
Short term (daily chart):
UP (RSI in overbought zone)
In the short term, with RSI in overbought and VIX in oversold, i expect the market to move sideways to the upside for a while before another bigger move favouring the bulls.
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NOTE: All information provided “as is” for informational purposes only, not intended for trading purposes or advice.