As we get closer to the month end, election day and the creation of another trillion dollars out of thin air, the markets continue to play rope-a-dope with investors.
Traders, on the other hand, are hopefully enjoying themselves as the computers are running through every sector, a few at a time.
Market leadership last year was financials, energy, materials & technology. They all fell out of favor throughout the summer correction and this rally has been led by commodities more than anything else.
But as the anointed names rose to the stratosphere, most of the rest of the market has followed. Industrials, energy, materials, & technology have all rallied. Financial haven’t, not even the good ones.
Over the past two weeks, while the SPX has traded in a 10 point range, the rotation game continues. Lately, materials and commodities have stalled. Financials continue to do nothing and it has been the lagging technology, semi’s and the most speculative names that are going up. So is volatility in individual names. The bullish trend remains intact, but it is fraying….Continue using the markets inability to correct in order to liquidate position or simply raise your stops to protect your profits…
“They” will not let the market down before the election, period. Black Helicopters? Nah…
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Scott would you say these constant reversals (dojis) with tug a war here are a by product of the distribution taking place? Also what do you make of the major CDS blowup taking place in the Eurozone?
Within a “normal” market environment, these Dojis are a sure sign of topping and/or a change of direction–or at least a period of consolidation.
But we know that the structure of the market has changed. Therefore we must be aware of the ways in which traditional technical indicators can be skewed or otherwise distorded.
How many times have we seen almost perfect head & shoulders tops get blown out. How many times have we seen normal indicators of sentiment get stretched 2, 3, 4x normal extremes.
My work suggests that these Dojis happening right now should be viewed with caution. I want to get short, but this 10 week trend might stretch out a bit longer and may go parabolic before it ends.
Our strategy is that I will use the “lagtime topping action” to liquidate almost all the stocks we bought through the summer accumulation.
Thank you sir, makes sense to be cautious.