Hello again readers! Sorry I missed Thursday night's post.. some other stuff came up of higher priority. But, I promise to make it up to you with lots of great charts today! Overall, the big picture view looks slightly scary, but the shorter term view looks like we may see a little more volatility in the market as it melts up a little higher before a larger pull back. Allow me to explain.
In my daily scoring system (above) you will see that the RumWave score is quite green. This would normally indicate an increased probability of a move to the upside. However, my criteria for purchasing long positions has not been met, and it would take a very big move to the downside to turn on the "green light." Oddly, there is a little bit of a BULLISH divergence (yes, bullish) on the RumWave chart. I'm going to look back to see if this has happened previously, but for now it indicates that a short term move higher is not out of the question.
Long term chart views:
Above is a weekly view (each candle represents one week of time) of the Dow Jones Industrial Avg. Regular readers will recognize my favorite phrase, "don't outsmart your common sense." This looks like a chart that is ready to roll over to me. One of the big warning flags that I see is a Heikin Ashi candle that is showing a decrease in momentum. Another big warning flag is the RSI is turning downward from a very "overbought" level.
The chart above is a weekly view of the S&P 500. Same thing as the Dow, it looks ready to turn over, but it doesn't show signs that it has already started. The RSI is still sloping upward.
Above is a chart of the NASDAQ. This one is really interesting because the QQQ has not participated in the 2013 rally as fervently as the rest of the averages. At the same time, the Slow Stochastic of this average is pegged at a very high level. This suggests, to me, that when this thing goes down, it may go down pretty violently.
Last, we'll look at the Russell 2000. It is an index of small cap stocks. I like to look at it because I've previously observed the small caps leading the large caps lower. If we are able to see that happen, it can give us a "head's up" that the major averages may be about to roll over. So far, the Russell 2000 has not shown signs of turning over, but the candles are showing a drying up of the momentum, and the oscillators at the bottom of the chart are all firmly in overbought territory. However, this has happened before. You only have to look at the left half of the chart to see the Sep '11 to Apr '11 run. The RUT, in that case, rode the high oscillator level for a long, long time.
GAMEPLAN FOR NEXT WEEK: Remain nimble, occasional tactical level (short term) gamble plays, but no strategic (long term) long or short positions.
GOOD LUCK NEXT WEEK!
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