Here's a favorite market aphorism that helps me stay on the right side of the market:
"When a market doesn't do what it's supposed to do when it's supposed to do it then it may be about to do the exact opposite in a big way"
Well, the action in the market over the last two weeks of earnings season fits the above description. Today's intraday reversal was a big yellow flag. I am not calling "the top" or suggesting that we get short but I am putting out the caution flag.
Briefly, we have an expanding range pattern (red) which is typically a topping pattern that has formed since July. We have a failure at resistance from the prior trend (first green trendline). We are threatening to violate the former high at 1075 potentially leaving behind a bull trap. A test of the primary green trendline may not be far away. What happens then will define the market going forward.
Could we rally from here to new highs? Sure! But that should have already happened. We "should" be at 1115 right now, not 1075. Caution is warranted. On the other hand, we must keep in mind:
"It is what it is until it isn't"
It's still a bull trend until we have a low followed by a lower high and this must come BELOW the current primary trend. This could yet take months to form (if this is to come at all).
I recommend that we take profits on equities trades and tighten up stops on commodities trades. It is also time to start to think about getting long USD (it is NOT time to go all in!).
NDX: Exit trade at small remaining profit on open.
Crude Oil: Take 50% profit and move stop up to breakeven on remaining position
Natural Gas: Take 50% profit and move stop up to breakeven on remaining position
Copper: Take 50% profit and move stop up to breakeven on remaining position
USD.JPY: Place buy order at 91.32 with a stop loss at 90.80.
USD.SEK: Place buy stop order at 6.96 with a stop loss at 6.89.
More details on these trades can be found at
Hopefully this cautionary note is proved unnecessary and we are b...