Refusal to go down
Posted by Danny on January 13, 2014
Not a strong start for stocks this year, but so far the downside action is limited and the markets are going mostly sideways.
This refusal to go down can be seen as a sign of strength. Or is it the proverbial silence before a storm?
Let’s have a look at the S&P 500 (click for larger image):
We have another week of lunar red period to go, and none of my indicators show a clear buying opportunity at this point.
The Earl indicator is trying to form a very shallow bottom. I don’t trust shallow bottoms in this indicator, as they are often followed by another swing lower. The Earl2 is still weak, and the MoM indicator is in the process of coming down from very optimistic levels.
So, I am not a buyer here. In the best case I see the market continue sideways for a few more days and then push to marginally higher highs by early February. But, around 1870 the S&P 500 would meet with an overhead trend line again.
Looking to the downside, the first major support is just above 1750.
That’s not a good risk to reward ratio from a buyer’s point of view.
Refusal to go down can easily turn into refusal to go up.