Sunday, January 27, 2013

Don't fight the tape

I've been beaten into submission

The trend is your friend... Don't fight the tape... Don't fight the Fed... If you can't beat 'em, join em.  However you want to say it, I have to change my tune for the time being.  I'll go along with the bullish sentiment that has gripped the bears by the throat.  The RumWave has not yet produced a "Sell" signal, so by all my tested measures, the market is still in "go" mode.  That said, I still think we are way way overbought and the charts just look ripe for a collapse.  I'll jump on the bandwagon for now.

I doubt that I'm the only one that has been in the bearish camp for the last couple weeks that has capitulated to the bullish ways.  It seems like the perfect time for a reversal!

Daily Scores:

Take note of the Daily and 4 hour scores in relation to their previous peaks (above).  Not really sure how much higher they can go.  The RumWave continues to decline.  Oddly, it has reached a level of support while the DJIA has continued to climb.  Usually, that level of support would lead me to predict a large market move to the upside..

The DJIA chart above shows no signs of breaking down just yet.  Clean-bottom green Heikin Ashi candles indicate the trend is still intact.  RSI and Stochastics are pointing up.  MACD is still moving up, but the lines are ever so slightly closer together and the histogram (green and red bars) have been the darker shade of green for a while.  By itself, those dark green bars don't really mean anything when I consider all the other positive indicators.

The NASDAQ is in a channel, and is bouncing off the bottom of that channel.  The green doji style candle is indicative of a possible change in direction (to the upside) and the RSI and Stochastic are positive.  The MACD is still pointing down, but the blue line is now leveling out.  It seems primed for a pop to the upside.. which is why I have a Call on the QQQ.

Last, we will look at the SPX.  No bearish signs yet.  Green, clean candles.  RSI, Stochastic, and MACD all showing upward direction.

One last thought.  The RumWave has not produced a sell signal through all of this year's market gains.  While it is true that the "Green Light" never got turned on because it was usurped by the Fiscal Cliff news, I do still find it encouraging that the indication to ride the wave has remained valid.


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