The seat belt was bucketed as the bears took action last trading week. Which means i was taking sides favouring the bulls. This coming week, should we tighten our seat belt or hit the eject button?
Long term chart (not shown here) is still UP. When market climbing up the edge of its price envelop, it means bulls are strong. This action can last for 3 – 5 months. However, an uptrend does not move up in a straight line. Let’s check out the midterm perspective for signs of possible deeper pull back.
On the midterm, the market cooled off from its overbought slightly. But the trend is till UP. For the midterm trend to cool off completely, Dow must fall another 300 points, S&P probably another 20 points. Let’s check out the possibility such pull back from the short term perspective.
The short term trend has just turned DOWN from its overbought. The short term trend is starting to turn down. But it is not in oversold condition.
VIX (Fear index) mid-term price bounced off from its support level. VIX Short term is near its overbought zone and had paused its up run last Fri.
Long term (monthly chart):
Mid term (weekly chart):
Short term (daily chart):
Last evening, I attempted to go for a jog. As i was all geared up, the sky started to pour. This morning, i was all geared up again. When I hit the park, it started to rain again. Did I continue to run in the rain or just head back and call it a day? I’m not that brave to run in the rain. I have a long busy week ahead. Too big a risk for me.
This applies to trading too. There is a time to buy, a time to short, and a time to stand aside.
For shorter term perspective, last Fri price action has slowed, with not much follow through to the down side when the bears have a chance to do so. This is a bullish sign. PLUS the Jan barometer favours the bulls this month.
But we are currently in no man’s land situation. Dow and S&P is not oversold yet, even though VIX is near the overbought end. Maybe it is time for you to stand aside and do nothing. If you must trade, hedge your position or have a tight stop loss, plus keep your position small. Not a good time to be a hero in no man’s land.
If you are already in the market to ride the up trend, hang in there. But as soon as the trend reversed, just get out with profit in your pocket rather than losses and live with no regrets.
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NOTE: All information provided “as is” for informational purposes only, not intended for trading purposes or advice.