Since my last report the market has continued to surge higher with some stabilization at the 2600 level and again at the 2700 level. The drop on 07 February signalled to cover but the important 2680 level held firm and buying has pushed the market back up through the important target 2740 area with a continuation S/T Buy Signal confirmed on 12 February.
Save the image to your desktop to view a larger version
As we can see in the chart below, the T volume oscillator – an indication of relative Buying Power within the market as a whole – continues to be very strong and supportative of a continued recovery into (at least) the next series of projections for highs, and until we see significant profit-taking going on under the hood * , we should assume that the panic is over (at least for now) and that bullish liquidity and momentum are supportative of the market in general.
* For an example: Looking back a year ago to the January 2018 move, we can see that the T volume oscillator was already declining towards zero well before the end of the huge rise into the January peak.
Save the image to your desktop to view a larger version
Zooming out to the weekly chart below. What I am seeing is that the market has been going through a process of re-establishing major support (ie where exceptional value lies) and that this is something necessary after moving upwards through an important trend line.
The movement upwards above 2400 in summer 2017 which accelerated into the January 2018 peak became unsustainable above the long term rising trend line, and therefore led to to the February collapse, and subsequently also to the April collapse.
When the market recovered to new all time highs – again above the long term trend-line – it became unstable again and looked for support once again. This time the market was considerably weaker and looked for more important support below the original breakout area of 2400 and at the important untested Summer 2017 lows.
Once the secondary support level was reached the market's reaction was very swift and sure indicating significant support and exceptional value.
If this ricochet move off the December lows is anything similar to the rise off the February 2016 low, then we should see a challenge to the most recent area of price resistance (2800) and once (or if) that challenge is successful, we could see another very large and extended move higher in due course, in the right-hand side of a very long range T structure of similar proportion to the 2016 structure.
Save the image to your desktop to view a larger version
As we can see in the monthly chart the strong bounce back above the warning level of 2639 (21 ema) and the subsequent move back above the important bull market support level of 2751 (10 ema) is very encouraging.
If the market is to continue to recover and proceed to new all time highs, as per the next monthly projection for a high in the September – October time frame, we would like to see continued support at and above the monthly 10 ema.
The caveat is that the long range oscillator is warning of potential further trouble ahead, and so we should not discount the possibility of a re-test and a double dip of some sort as we saw in 2016 when the market recovered to its challenge area and then moved back lower.
Save the image to your desktop to view a larger version
All in all, 2019 has started with a move that continues the dynamic range of 2018 – far beyond the experience of the previous years. We should expect price volatility to continue and trade accordingly. This is a Brave New World.
–
Be prepared for whatever is coming next, and trade with confidence:
To receive detailed daily analysis, guidance and the updated daily Buy / Sell trigger levels being generated by the Trading the Line system before the market opens, and intraday alerts when appropriate, please become a Member and Sign up for Alerts & Observations – includes access to Members Area and the Explanatory Notes for all of the concepts discussed.
Disclaimer: This is the diary of a personal trading system, its methodology and the signals that it is producing. You are welcome to follow along but please understand that the information presented here is for educational purposes only. No recommendations are being made to buy, or sell stocks, options or futures contracts. Please consult your own financial advisor before making any investment decisions.
No Comments
