Beware the bounce! Although the indexes are trading positive after the open in the S&P 500 and NASDAQ, they are not showing anything more than possible short covering. The Dow is trading below the T line indecisively. Currently there is no indication of any change of the current downtrend. Be patient with short positions.

The diversions in the markets remain apparent, the Dow continues to trade higher while the NASDAQ continues to trade lower. However this is making the strong and weak sectors very apparent. The metals are trading very bullish today, steel stocks. The big techs continue to trade lower. Continue to have both long and short positions in the portfolio.

Although the indexes are trading higher, they are indecisively higher. Revealing that there has not been any major change of investor sentiment based upon a new year. The electric vehicle sector appears to have decent bullish activity but most other sectors remain relatively indecisive. Although the indexes are not showing any decisive move, the T-line indicates the uptrend remains in progress. The analysis of each individual stock/sector remains the top criteria.

The market obviously still in a Santa Claus rally. The NASDAQ after consolidating a couple days has continued its uptrend. Numerous stocks have consolidated back to the T line or other obvious support levels and starting to trade positive again today. Numerous short positions have started showing strength, many were closed based upon the Doji rule. Stay predominately long until the market indexes reveal confirmed sell signals.

The analysis remain simple, as long as the indexes continue to trade up above the T line, the uptrend remains in progress. The NASDAQ is doing a little consolidation/profit-taking but not showing any major change of investor sentiment.

The strength in the Dow and the transportation index implies the modest selling in the NASDAQ is merely profit-taking. The semi conductors that were acting strong yesterday are demonstrating profit-taking today but not any major change of investor sentiment in those sectors. Assume the Santa Claus rally remains in effect without any evidence of reversal signals in the indexes.

The Dow appears to have stalled at the 50 day moving average. The first major resistance level will usually act as resistance when a new trend starts with a non-reversal signal. Short positions are still working well. The bearish Doji sandwiches are working i.e. BNTX and NVAX. The indecisive nature of the market still makes having both long and short positions, that are using the T line as confirmation, in the portfolio.

Beware the bounce! Why? The indexes, although trading positive, are still trading below the T line and the stochastics are in a downward trajectory. This would cause any suspicion that the bulls have taken control. The small biotech’s continue to show bullish trends but the big tech stocks have opened positive but immediately started selling lower. Use the T line as your ultimate trend indicator.

Why did the market selloff after potentially good news following the Fed announcement? Was it because investor sentiment was being influenced by other factors? Who knows! And we do not need to know! The markets illustrated that very sentiment was still prevalent in the investment thinking. This is why you let the market tell you what the market is doing. Stay short.

Observation of note, notice that stocks that were in a bullish trend continue the trend. Stocks that were in a bearish trend may have shown buying into yesterday’s rally but have likely opened positive today and then continued selling off. Use the T-line as a trend reversal criteria. The gap up in the Dow today is creating a bullish J-hook pattern, with obvious support at the 50 day moving average/T-line.