Charts and long term score

Lets not miss the forest for the trees

The market popped on Friday as I expected.  I was really glad that I had gotten myself and my friends out of their short positions Thursday.  At some point in the not-so-distant future I may recommend that we get back into the shorts, but for now we will patiently wait in cash.

The scores above have done what we expected, but they are still high for the daily and RumWave scores.  What I want to draw your attention to is a bigger picture view of the market.  Below is a weekly chart for your reference.  Note the slow stochastic and %B and RSI.  All are at pretty high levels so I thought it may be beneficial to put the numbers for the weekly chart into my scoring system, just to see where we are.  Remember, the score system is void of emotion, so it gives us the most analytic view of the chart that is free from interpretation error.

DJIA Weekly Chart

Weekly Chart Score

The score that my system returned was 254.  Comparing that to the charts below of historical daily and 4 hour scores, 254 is literally off the chart.  I know we are comparing weekly scores to daily / intraday scores, but the concept of the scoring system should yield the same overall results because the scales are identical.

 Over the next couple days I'll take a look at how previous Weekly chart tops have scored so that we can see how it relates to where we are now.  I say all this to keep us mentally prepared for a couple of weeks of downward momentum.  I can't say with absolute confidence that it will happen, but the RumWave and the Weekly chart score seem to paint a picture of a probable multi-week decline.

DJIA Daily Chart

 The daily chart above shows that the market started a pretty strong down swing this week.  The red line on the slow stochastic is a low levels, while the purple line is still pretty high.  The MACD looks like it is at relatively elevated levels, so it should start to move back to lower levels in the next week or two.  I interpret this as bearish in the medium term (next couple weeks).

DJIA 4 hr Chart

The 4 hr chart broke the red candle trend on Friday.  I think this was just the bears taking a siesta.  They'll be back soon enough.  I expect a continued bullish push early next week as we prepare for Jackson Hole and Ben Bernanke's speech, which I think will result in disappointment for the market, and then continued declines for the following couple weeks.

ENJOY YOUR WEEKEND!