Another lazy Friday of summer. The market is trading absolutely flat, the NASDAQ is up a little bit, the Dow is down a little bit. The transportation index is doing a bullish Harami right on the T-line. There is nothing showing any great conviction to the upside nor the downside. This will probably be a good day to play golf.
Today’s early selling in the Dow keeps the market conditions the same as the past week or so. Indecisive lack of selling pressure but also not showing any huge bullish sentiment. The NASDAQ trading slightly positive and the S&P 500 basically flat merely reveals investor sentiment is continuing in a very slow but slightly positive trend. This may be the summer doldrums. Until there is a dramatic sell signal in the markets, continue to stay predominantly long in the charts that are showing good strength, trading above the T-line.
The market analysis remains the same, as long as the indexes do not show a confirmed sell signal, the uptrend remains in progress. The consolidation of the past few days has allowed the T line to remain reasonably close to the uptrend. This reveals that there is no exuberant buying in the trend so far. Continue to stay predominantly long, any short positions should maintain compelling selling evidence.
Today’s lack of conviction in the markets continues to reveal consolidation/profit-taking after a nice strong bullish move over the past four weeks. Be prepared to take profits on confirmed sell signals. However, numerous bullish charts are not showing any strong reversals, merely sideways consolidation. Candlestick charts allow investors to visually witness when the selling has definitely taken control. Until that time, hold long positions.
The NASDAQ is showing good strength today, potentially forming another little J-hook pattern to the upside. The Dow and S&P are also trading positive but not with any great strength so far today. Although the uptrend remains in progress, there still remains signs of a possible profit-taking reversal. The gap up in the indexes on Thursday, as well as moving away from the T-line in the overbought condition, makes the prospects of a reversal more likely. Continue to stay long but be prepared to take some profits on signs of weakness in the market.
The Crude Oil chart is following a textbook pattern right now. 10 days ago, in my last update, I said that Oil was in a small correction and projected that it would get down to ~$45.50 – $41.50 before the next impulsive wave up begins. It made it down to that level and is sitting right on the bottom of the Ichimoku Cloud, which should provide some support. Then next move up hasn’t started yet, but it could at any time and we will have plenty of time to see it happen and be prepared. When it does start, I’ll give another update and will include some trading ideas.
Natural Gas is still in an uptrend. It has pulled back just a bit, which is normal. I am looking at an initial support level of $2.642, and if that fails, then major support at $2.582.
In the last update I pointed out WMB as a potential trade to play the Natural Gas recovery. I said that if WMB got up to $22.25, I thought that would be a good long entry price. It did hit that level and is now sitting at $23.24. I have a stop at $19.67 and a target price of $29.07. Entries are still possible on this trade at this time. It may pull back a bit, but it has what looks like good support from the Ichimoku Cloud well above the stop price.
That’s it for this week. I will keep the updates coming. Be sure and let me know if you have questions or comments. Thanks!
MBA from the University of Washington. Dean is an expert in Technical Analysis, Money Management, Elliott Wave Analysis and founder of FollowMeTrades.com
There is a warning flag today. Where do most people buy? They buy exuberantly at the top. Exuberance can be illustrated with a gap up in the overbought condition. This is what has occurred in the Dow and the S&P 500. Does this mean the uptrend is over? Not necessarily, but be more diligent as far as watching for the selling/sell signals. Continue to stay long but be prepared to take profits if today’s strength starts dissipating.
The indecisive trading in the markets this morning is not unexpected. Wave three is now approximately the same length as wave one of the Dow’s J-hook pattern. The indexes have moved away from the T-line, creating the expectation of some consolidation. The markets could move sideways or pullback until the T-line catches up. Expects some profit-taking in this area.
The uptrend/J-hook pattern continues in the market indexes. Today’s trading currently demonstrates a solid day in the Dow, S&P 50 and the NASDAQ. The most compelling chart today is the transportation index up, up strong and forming a Doji sandwich, illustrating the 200 day and 50 day moving average are not acting as a resistance level. Continue to stay predominantly long but expects some profit-taking with the indexes moving away from the T-line.
As anticipated, the breakout of the resistance levels on Friday are showing the investor sentiment is now in a new bullish trend. The NASDAQ continues to gap up to the resistance level of the recent highs. The Dow and S&P 500 have broken through the highs. The J-hook pattern in the Dow at the resistance level produced the high probability that the breakout to new highs was about ready to occur. Look for a little bit more upside but then be prepared for some short-term profit-taking.