Friday, 2 November 2012

Primary trend...uncertain

Today saw the indexes rally for the first time in two weeks. Despite today's price action, the bigger monthly charts are still suggesting 'weakness', but we are within a very tricky trading level, one that both bulls and bears should be very cautious about.

sp'monthly3, rainbow

dow'monthly2, rainbow


With the new month, the important 10MA on the sp' is now up to the 1390s. That coincides with the important Sept'3 low of sp'1397.

The doomer bears out there MUST see a few consecutive daily closes <1397, in order to have any degree of confidence. Until that level is taken out, no one can get 'confidently bearish'. It is that simple.

The bulls merely need to push to new index highs, which are disturbingly only 3% away.

With the US election next week, it would be somewhat understandable if we rally for a few weeks. If that is the case, it would be surprising if we don't quickly make new index highs.

Trading stops..are useful.

Let me be clear, the big monthly charts - including WTIC Oil, and even the precious metals, are warning of 'some' weakness. Whether bullish or bearish though, the current index levels are a very treacherous zone to be trading.

Arguably the 'safer' bear trade is to chase lower with a break <1397, and the 'safer' bull trade is to chase higher once we see new index highs >1474. Until we see the market break outside this 1397-1474 range, I don't think anyone can be confident of where we are headed.

Goodnight from London