Another indecisive day leaves us wondering if and when a substantial pullback will get going, but even though the Qs triggered a short term MACD sell signal (intermediate term traders hold for the second signal), the price levels that would confirm that such a pullback is underway have not been violated. The longer this goes on, the less likely it is that we will see a significant pullback before the market moves higher.
Gold appears to have completed a 3 wave rally from the July low on Aug 6. Coming under 932 should accelerate the downtrend and coming under 926 will confirm that the intermediate trend has turned down. Oil on the other hand held up well and may move higher when the Dollar corrects its first upthrust off of the Aug 5 low. If oil does breakout, it may be a 5th wave, and we may see it top in the next week or two, so such a breakout might be riskier than would otherwise be expected.
I continue to manage my long stock positions and await an opportunity to re-enter index long positions. I will be looking to add new stock positions on breakout opportunities that develop once a pullback or consolidation completes.
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4 comments:
Craig,
What do you think of GENZ ? While it is apparent that it made a key reversal day today on very heavy volume, because of the June/July consolidation i am doubtful of the EW count.
Regards,
dave
"If oil does breakout, it may be a 5th wave, ... so such a breakout might be riskier than would otherwise be expected."
That may be why USO August 37 calls were down most of the day even though USO was up.
Also, if the consolidation since Aug 3rd is a 4th wave rectangle (of the larger 5th wave), the move up may turn into a false breakout quickly.
Craig, your thoughts about these two aspects ?
Regards,
dave
Dave,
I am very leery of GENZ. One possible wave count puts it completing a very large ending diagonal which would project to going to new all time lows. The waves are choppy and overlapping.
On the other hand, one cannot rule out another choppy move to new highs in a 5th wave.
It is too uncertain for me to trade.
I agree on oil as it looks as though any 5th wave would be short lived. As long as gold continues to decline, oil will follow, but if gold finds a bottom, then watch out.
Tom McClellan has shown that oil lags gold about 40 trading days, and I have found that relationship to hold on a loose basis.
Dave,
With regard to your other unposted comment. I certainly did not agree with the mentioned blogger in 2008, as he appeared to be stuck in an opinion about the market rather than following a methodology. However, this year his fortunes have changed. I don't understand his approach so I don't pay too much attention to his forecasts.
The problem, overall, is that too many commentators advise and trade on opinions. I don't care what my opinion is, if I get a valid sell signal, I am going to sell. If I see a valid setup, I am going to trade it. Used correctly, forecasts are more about preparing the mind to accept the possibility of an outcome, so that when a setup occurs, it can be taken without hesitation.
I think many will be hesitant to buy a pullback here in the indexes for fear that the rally is over, but knowing that there is a valid basis for expecting higher prices in the coming months will allow me to pull the trigger. If it doesn't work out, then so be it. But one thing is for sure, there is little basis for being short right now, except intraday.
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