Breakout Then Pullback
The following is an excerpt from the May 1, 2012 blog for Decision Point subscribers.
The 10-minute bar chart shows trading sharply up early in the day and then arching gradually back down, losing half the gains.
Stocks: Based upon a 12/05/2011 Thrust/Trend Model buy signal, our current intermediate-term market posture for the S&P 500 is bullish. The long-term component of the Trend Model is on a buy signal as of 1/5/2012, so our long-term posture is bullish.
Looking at the daily bar chart it appears that after the ultra-short-term breakout in the thumbnail and nearly reaching horzontal support at this year's high, it pulled back down. This price action was enough to get the PMO up above its EMA to trigger a PMO BUY signal.
The CVI turned back up and is overbought again and now the STVO is very overbought. The VTO like our other intermediate-term indicators continues to rise and is neutral.
The PBI turned up today as it continues to chop around indecisively. It has some distance to cover for a positive crossover its EMA, so while the PMO has had a positive crossover, the Thrust component will not go on a BUY until the PBI also has a positive crossover and that could take some time. So while momentum seems to be very positive, it isn't enough.
Conclusion: We are seeing the market start in a new consolidation trading range defined by the bottom of the double-bottom and the 2012 market high. It may require some more chop to alleviate overbought short-term indicators. Once that is done, intermediate-term indicators tell us more rally could be ahead. There is a 5-Week Cycle low due in about two weeks or less, which could define the duration of the trading range.
Today I pulled up the 6-month line chart for gold mainly to get a different view. A few days ago, Gold broke out above the declining tops line and we see that the 5-EMA had a positive crossover the 20-EMA to trigger and Trend Model short-term BUY signal. Gold hasn't done much since then except pull back slightly toward the breakout point. Price still remains above the declining tops line, the 5-EMA and the 20-EMA.
USO jumped and broke out today. The PMO has already had a positive crossover and now it appears the Trend Model will be moving to a BUY signal tomorrow as the 20-EMA is only two one-hundredths below the 50-EMA. A positive crossover would only be prevented if the price were to pullback below both the 20/50-EMAs which is not likely.
Looking at the 6-month line chart for TLT we see that today it broke down below the rising bottoms line. The PMO also topped today.
Technical analysis is a windsock, not a crystal ball.
About Erin Swenlin Heim
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