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What Goes Up….

I've seen this movie before & the ending is always the same: Near vertical rallies terminating with overbought readings on the RSI immeidately followed by a bearish crossover on the MACD typically results in an equally sharp move to the downside.

QQQ daily August 8th

QQQ daily August 8th

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Aug 8, 2016 2:24pm|Categories: Equity Market Analysis|Tags: , |17 Comments

17 Comments

  1. dan123 August 8, 2016 2:36 pm at 2:36 pm

    So true, however this time i think the drop is going to be much more sevear

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  2. snp August 8, 2016 2:37 pm at 2:37 pm

    but the movie theatre is mostly empty

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    • rsotc August 8, 2016 3:14 pm at 3:14 pm

      The theater isn’t empty, it’s just that everyone has fallen asleep. As soon as someone yells ‘FIRE’ there will be a rush for the exits.

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      • lee1 August 8, 2016 3:26 pm at 3:26 pm

        Randy, this market will go higher and for longer than you can imagine and no chart can prepare one for what is still to come. We will have pullbacks but overall this will only frustrate the bears and shorts for quite a while as every pullback they will continue to call the top.

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  3. lee1 August 8, 2016 2:38 pm at 2:38 pm

    Will make a friendly wager the pullback wont be more than few % and will then make new highs.

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  4. alshaw August 8, 2016 2:44 pm at 2:44 pm

    bravo

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  5. snp August 8, 2016 2:48 pm at 2:48 pm

    just switch the channel, that will solve it

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  6. snp August 8, 2016 3:12 pm at 3:12 pm

    janets reaching for the remote right about now. mumbled something about it being her TV

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  7. morrienelson August 8, 2016 3:27 pm at 3:27 pm

    The degree in severity on the drop will depend on whether Hillary’s seizure medication can hold her together.

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  8. bronson1957 August 8, 2016 3:33 pm at 3:33 pm

    Randy the markets slightly down today the volume is extremely low much lower than Friday and lowest in last 6 months. If it reverses today or tomorrow with an increase in volume will you still hold your bearish stance. Just trying to understand where your coming from.

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    • rsotc August 8, 2016 3:59 pm at 3:59 pm

      bronson1957 – The markets are essentially flat today, with the SPX only down about 0.15% & the small & mid-caps trading positive earlier until just recently going slightly red. One thing I work hard to do is to post bullish & bearish trade setups & market developments in advance of the actual move. As such, you will often see me making the case for a rally while the trend is still bearish & vice versa.

      While my analysis isn’t perfect, my style is more of a trend ‘anticipator’ than most who employ a trend following strategy. I like to try and identify major turning points in the market or a stock and position either slightly ahead of it or as soon after the turn as possible. Doing so will invariably result in some cuts from trying to catch a falling (or rising) knife but on balance, that strategy produces much larger gains when correct than losses when wrong or too early.

      To more directly answer your question, as long as the broad market is at overbought levels with bearish (negative) divergences in place, short interest at multi-year lows & other complacency (bullish) sentiment measure recently near the upper (or lower) end of their ranges, I prefer to look for the next objective short entry rather than follow the herd at this point & jump in long (again, speaking on the broad market as I am always willing to go long or short individual stocks with the best patterns regardless of my overall bias on the broad market). Should the case for a likely correction dissipate & charts begin convince me that the R/R to go long the broad market is favorable at some point in the near-future, I will do my best to communicate those thoughts asap. Until then, I’d rather watch the SPX climb another 10% without me than blinding jump in long for the ride without being able to make an objective case to do so other than blind faith that current uptrend will continue for the foreseeable future.

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  9. bronson1957 August 8, 2016 3:39 pm at 3:39 pm

    A few points down and the bears coming out. It’s the same tune. People getting suckered into shorting this grinding uptrend.

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  10. roguetraderone August 8, 2016 3:54 pm at 3:54 pm

    Apparently it is different this time…

    “One of the biggest warning signs of the financial crisis is flashing again — but this time is different”

    http://www.businessinsider.com/finance-crisis-warnings-sign-flashing-again-libor-2016-8

    “The market’s closely watched “fear index” is at a one-year low, but it may not be heralding the kind of market sell-off it has in the past.”

    http://www.cnbc.com/2016/08/08/vix-1-year-low-and-what-it-means-for-stocks.html?__source=yahoo%7Cfinance%7Cheadline%7Cheadline%7Cstory&par=yahoo&doc=103853401&yptr=yahoo

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  11. Dazi August 8, 2016 4:44 pm at 4:44 pm

    Randy, thankyou for your analysis, as always, but in addition, must thankyou for proper use of a colon [which is rarely seen these days].

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  12. snp August 8, 2016 11:12 pm at 11:12 pm

    @dazi-good point and interesting.

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  13. joefriday August 9, 2016 11:37 am at 11:37 am

    Agree 100%. It really is just a matter of “when” and not “if”… but it is admittedly very frustrating waiting for the flush..

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    • rsotc August 10, 2016 3:22 pm at 3:22 pm

      “It was never my thinking that made the big money for me, it always was sitting.” -Jesse Livermore

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Comments are closed.