A top is made when the generals draw a line in the sand, and declare "here and no farther". That line was drawn Friday at 3:05 with the DJI at 10,572 and the XMI at 1169.48. Since then these generals have gone nowhere, both are down at this point and both are digging into key support. DJI support at 10,540 and XMI at 1163 and will rally from here to resistance above at DJI 10,570.
The S&P also made its orthodox high on Friday at 3:05 at 1139.40, traced an ABC to 1141 Monday, another ABC to 1145 Tuesday, and finally another ABC today at 1147.68. There was an expanded flat after that to a high of 1148.10. The S&P contains a healthy portion of tech companies and thus is a hybrid of brick-and-mortar and tech. However, the S&P has been making its nominal new highs on ABC, not impulsive, moves.
What does this mean to a trader? It means that every nominal new high in any average is seized as an excuse to go long and the talking heads broadcast it as something "s'possed to fire my imagination". The ability to know the next week's trend and objectively evaluate movements real-time as impulsive or corrective is the only way to get into position before trend changes become obvious to everyone. To see beneath the shrieking media is the key to investment survival.
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Good stuff, your insightful commentary with detailed stock/stop
ReplyDeleteposition is appreciated. Do you see the market going down soon (this week) in line with your I1 prediction?
thanks,
-positron
If it doesn't it will be the first I1 failure in over a year. The market has topped, but the extreme enthusiasm over the Nasdaq has to burn the participants with a sudden, violent decline. In a bull market their behavior is rewarded but when bull turns to bear it is punished. The bear market will be official at DJI < 10,400. Meanwhile I am holding 15% of my capital in shorts waiting to commit another 15% of support break S&P 1136.80.
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