After coming out of the chute with good strength today, the market indexes have backed off. Crude oil open strong but then had a major reversal. Although the initial strength of this morning has dissipated, the candlestick charts continue to reflect a major overall bullish sentiment. This was the attitude of the market trend prior to today’s new year trading. This merely reveals investor sentiment is continuing with the sectors that were acting well going into the end of last year. Although oil stocks have backed off today after trading higher, they still have not shown a change of investor sentiment. Investor sentiment still implies the strength that came from the results of the election is still the predominant force.
Although the week between Christmas and New Year’s does not usually have any relevant forceful moves, it does provide an indication of what might be strong going into the first quarter of the next year. Gold stocks are picking up steam, that becomes a viable sector to watch immediately after the first of the year. The bearish trading yesterday made the prospects of breaching the 20,000 level in the Dow more tentative. Investors became more discouraged the longer it took to get up through that level. This is a perfect illustration that prices move based upon investor sentiment, not fundamental reasons. Use the analysis of each individual stock chart to decide whether to remain long or short in specific stock positions.
Unfortunately the quest for breaching the 20,000 mark in the Dow is occurring during a time when there is not a whole great amount of investing occurring, the slow period between Christmas and New Year’s. Because investor sentiment is what moves trends, the lack of buying pressure at the 20,000 level may create discouragement that starts investors to take profits, further reducing the prospects of going through that level at this time. Currently the indexes continue to trade above the T-line. But be prepared to close out positions if the market starts showing definite selling, indicating the major hurdle at 20,000 is not currently going to be breached. However, it is still early in the day.
The push for the Dow 20,000 is still in progress. The Dow chart remains strong, producing a potential J-hook pattern again during this uptrend, the same can be said for the NASDAQ and the S&P 500. Continue to hold long positions, there are a few short positions that can be added to the portfolio as insurance, IE LVS, SSYS. However, the majority of the positions should be going with the flow, uptrending.
The markets remain in an uptrend, with today’s positive trading gaining back most of yesterday’s positive trading range before selling off going into the close. The market indexes have the potential of profit-taking while trading in the overbought condition but the signs of selling have not been confirmed. The uptrend remains in progress. Numerous candlestick price patterns are working well, AQXP up 15% yesterday, PGNX setting up the same pattern potential. Continue to stay long, especially in the candlestick patterns that are in the process of breaking out.
The Dow and S&P 500 have opened lower today but have not moved cents then, creating a small Doji so far. The NASDAQ is currently trading absolutely flat. This may be a wait and see day until the Fed meeting. Nothing has changed as far as investor sentiment. The uptrend remains in progress but it may be without much movement most of today.
The concern that the Dow has gapped up in the overbought condition is offset by the fact that the other indexes are trading positive without any signs yet of exuberance. The gap up in the Dow needs to be watched closely. If trading came back down through today’s open, that would be an indication that some profit-taking was occurring in the Dow stocks. However, this does not infer that the other indexes, which have recently been trading somewhat independent of each other, would not continue the uptrend. Stay predominantly long but be protective of profits.
Are the market indexes running out of steam? It doesn’t look like it. The Dow continues to trade higher, the S&P 500 is relatively flat today, and the NASDAQ is trading lower, but not with any great decisiveness. This would indicate that the market levels have now reached the area where each stocks/sector will now be trading on its own merits. Although the markets may not be going up with any great force, there will be specific sectors that still move with strength to the upside as well as others to the downside.
The market indexes continue to show great resiliency. The uptrend remains obviously in progress but be aware that the indexes have all moved substantially away from the T-line. This would imply some consolidation in the near future. Consolidation can consist of the markets moving sideways for a few days or some profit-taking pullback. Stay long until there is a definite reversal signal in the indexes and/or individual stock positions.
Note that the Dow is trading at the top of a trend channel, drawing a trend line through the April top and the July top. This is another good illustration that after the markets moved sideways for four months over the summer, the trading has now moved back up to what the upward trajectory would have been. This makes for being prepared for some profit-taking soon.