12.8.12 Saturday
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$DJIA (Dow Index)
(100SMA – Blue)
I don’t like using the term “has to” because nothing “has to” happen in the stock market. Unthinkable can happen and happened time and time again so I like using the term “warning signs” that the certain move “could” happen. They don’t have to but it “could” happen.
So here is the warning sign flaring on my chart.
We’ve been in this great bullish move since the Thanksgiving Holidays and it continued very strongly making many investors very happy towards to the Christmas and a New Year. However we all know that the stocks don’t USUALLY go straight up so we are looking at some cautionary signs that we might be looking at some pull back here next week and it could be sharp pull back.
Take a closer look at that 100SMA. Last June, we had very similar price action as to today’s. Early June, Dow Jones found some support and rallied but towards to the end of the month bulls met with 100SMA and retraced for about a week before continue it’s bullish move. And possibly that same scenario “Could” happen.
Again we could just push through and continue bullish but I will be very cautious next week with my bullish positions as we might be seeing a bearish week next week. Watch out for Doji or a Spinning top on Monday after close. If we close above the 100SMA with good looking candle, I think it’s going to continue but if we see signs of slow down such as Doji or Spinning top, I would be VERY cautious on the following day.
How low will it go if it does retrace? I would say 50% retracement from 11/16’s low and 12/07’s high which is about $12,800 level.
Working With Oscillators
Last June, we hit 100SMA and when we hit 100SMA, these Oscillators were at overbought status and it pulled back pretty sharply. And exact same pattern has occurred here as we have met with 100SMA, the Oscillators are at overbought status. (I don’t ever trade off of the Oscillators. These are just the gauge for the condition but one should never trade off of the Oscillators. Overbought does NOT mean the stock has to reverse. It could stay at overbought status as long as it wants. Just look at your Oscillators on $AAPL. It stayed at Oversold status for a whole month last month.)
We don’t have any data to assume that we are going to see a market reversal but I think we are going to see some retracement/pull back action from this bullish rally we’ve had last several weeks.
$COMPQ (NASDAQ Index)
NASDAQ is still struggling to break that H&S neckline resistance.
$SPX (S&P Index)
Same story here.
2 thoughts on “$DJIA $SPX $COMPQ – Looking Into Next Week”
Great advice on not trading oscillators Kay! Since following your blog, I have noticed many times stocks I follow privately do not always move as expected according to the oscillators. As a swing/position trader Kay, what is most important consideration before establishing a position in the market? I know I am asking the impossible but what is it that one should trade off of? We know it’s not oscillators. Thank you for sharing…………..very much appreciated!!
@LittleRiver hey good questions there. Yes don’t ever trade off Oscillators. they are just there to gauge us. Think of it as Odometers in your car. Can you still drive the car without odometer? yes. And those odometer does not move the car, engine does. You can be high on RPM and it must retrace yet, car can continue to go forward, thats how Oscillators work. well to be able to swing/position trade, you need to be very disciplined on your trade plan because fear and greed kicks in, that’s y most beginners stay day or two traders. Once they make gain, they dun want to lose it, so they close it out or they start to lose money, they dun want to lose more, so they close it out quick. So it takes years of trading and able to forecast market condition and also the discipline to stay with the plan and your analysis. its big question that requires hours and hours of lessson =p