Best of the Week
Most Popular
1.Canada Real Estate Bubble - Harry_Dent
2.UK House Prices ‘On Brink’ Of Massive 40% Collapse - GoldCore
3.Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - Nadeem_Walayat
4.Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - Marc_Horn
5.5 Maps That Explain The Modern Middle East - GEORGE FRIEDMAN
6.Gold Back With A Vengeance As Bitcoin Bubble Bursts - OilPrice_Com
7.Gold Summer Doldrums - Zeal_LLC
8.Crude Oil Trade & Nasdaq QQQ Update - Plunger
9.Gold And Silver – Why No Rally? Lies, Lies, And More Lies - Michael_Noonan
10.UK Election 2017 Disaster, Fake BrExit Chaos, Forecasting Lessons for Next Time - Nadeem_Walayat
Last 7 days
Reconciling the US Dollar Outlook with the Super Bullish Gold and Silver COTs - 26th Jul 17
Last Week’s Rally in Gold Stocks Erased - 26th Jul 17
Dollar, Bitcoin, Markets - Is There A New Flight To Safety? - 26th Jul 17
Central Banks ARE The Crisis - 26th Jul 17
Iran: Public Image Versus Historical Reality - Part 1: An Abridged History to the 20th Century - 26th Jul 17
Trump Fails To Understand One Critical Thing—Our Trade Partners Have Options, Too - 26th Jul 17
Stock Market and Gold Stocks Trend Forecast Update - 25th Jul 17
Saving Illinois: Getting More Bang for Its Bucks - 24th Jul 17
3 Stocks Sectors That Will Win in The Fed’s Great Balance-Sheet Unwind - 24th Jul 17
Activist Investors Are Taking Over Wall Street, Procter and Gamble Might Never Remain the Same - 24th Jul 17
Stock Market Still on Track - 24th Jul 17
Last Chance For US Dollar To Rally - 24th Jul 17
UK House Prices Momentum Crash Warns of 2017 Bear Market - Video - 22nd Jul 17
Crude Oil, Gold, ETFs & more: Pro-grade Market Forecasts - 22nd Jul 17
Warning: The Fed Is Preparing to Crash the Financial System Again - 21st Jul 17
Gold / Silver Shorts Extreme - 21st Jul 17
GBP/USD Bearish Factors - 21st Jul 17
Gold Hedges Against Currency Devaluation and Cost Of Fuel, Food, Beer and Housing - 21st Jul 17
Is It Worth Investing in Palladium? - 21st Jul 17
UK House Prices Momentum Crash Threatens Mini Bear Market 2017 - 21st Jul 17
The Fed May Show Trump No Love - 20th Jul 17
The 3 Best Asset Classes To Brace Your Portfolio For The Next Financial Crisis - 20th Jul 17
Gold Stocks and Bonds - Preparing for THE Bottom - 20th Jul 17
Millennials Can Punt On Bitcoin, Own Safe Haven Gold For Long Term - 20th Jul 17
Trump Has Found A Loophole To Rewrite Trade Agreements Without Anyone’s Permission - 20th Jul 17
Basic Materials and Commodities Analysis and Trend Forecasts - 20th Jul 17
Bitcoin PullBack Is Over (For Now): Cryptocurrencies Gain Nearly A 50% In Last 48 Hours - 19th Jul 17
AAPL's 6% June slide - When Prices Are Falling, TWO Numbers Matter Most - 19th Jul 17
Discover Why A Major American Revolution Is Brewing - 19th Jul 17
iGaming – Stock Prices - 19th Jul 17
The Socionomic Theory of Finance By Robert Prechter - Book Review - 18th Jul 17
Ethereum Versus Bitcoin – Which Cryptocurrency Will Win The War? - 18th Jul 17
Accepting a Society of Government Tyranny - 18th Jul 17
Gold Cheaper Than Buying Greek Villas in 2012 - 18th Jul 17
Why & How to Hedge the Growing Risks of Holding Stocks - 18th Jul 17
Relocation: Everything You Need to do for a Smooth Transition Abroad - 17th Jul 17
A Former Lehman Brothers Trader: It’s Time To Buy Brick And Mortar Retailers - 17th Jul 17
Bank Of England Warns “Bigger Systemic Risk” Now Than 2008 - 17th Jul 17
Bitcoin Price “Deja Vu” Corrective Sequence - 17th Jul 17
Charting New Low in Speculation in Gold and Silver Markets - 17th Jul 17
Bitcoin Crash - Is This The End of Cryptocurrencies? - 17th Jul 17
The Fed's Inflation Nightmare Scenario - 17th Jul 17
Billionaire Investors Backing A Marijuana Boom In 2017 - 17th Jul 17
Perfect Storm - This Fourth Turning has Over a Decade of Continuous Storms to Come - 17th Jul 17
Gold and Silver Biggest Opportunity Since Late 2015, Last Chance at These Prices - 17th Jul 17
Stock Market More to Go - 17th Jul 17
Emerging Markets & Basic Materials Stocks Breaking Out Together - 16th Jul 17
Stock Market SPX Uptrending Again After Microscopic Correction - 15th Jul 17

Market Oracle FREE Newsletter

Crude Oil, Gold, ETFs & more: Pro-grade Market Forecasts

Stock Market No Confirming Signal for a Top, Yet

Stock-Markets / Stock Markets 2013 May 27, 2013 - 01:36 PM GMT

By: Michael_Noonan

Stock-Markets

There is a reason why the trend is the most important consideration when positioning in any market. The number of profitable shorts, as of last week, can still be counted on one hand, at least those who remain amongst the ranks of the devastated ones still trying to pick a top. The most money is lost picking tops and bottoms, but top-pickers are always at odds with that fact. Richard Dennis lost more money trying to buy sugar under 5 cents than he did buying at higher prices on previous occasions. He ranks as a poster child for money lost in bottom-picking, and he was a highly regarded professional player.


No matter. Top-picking egos have been clamoring for a top over the past several months. Like a stopped clock, one day they will be right. We prefer to let the markets reveal their message and respond to it, rather than front-run it.

What will be evident in viewing charts from over three time frames, monthly, weekly, and daily, is that the trend is unequivocally up, and that is a strong statement from the market.

Where many may have anticipated the possibility of a triple top, the Fed-driven market sailed right through what would normally be resistance. One has to remember that the anticipated resistance was just potential, and it had to be confirmed by market activity showing signs of weakness and reversal behavior. It never happened.

The failure of a triple top is a great example of why one should follow the message from developing market activity and not front-run and get run over in the process. The channel shows that there is still room to rally without being in an overbought condition. What may provide valuable information will be the location of the close by the end of the week. A strong close will mean continuation. A weak close could signal a possible turn, but it takes time to turn a trend, so one does not have to be the first one in.

The dashed portion of the channel represents future support/resistance, once the first three points are established, the two swing lows in 2009 and 2011, forming the bottom support line, and a line parallel to it using the swing high between those points, 2010.

What has many bears-in-waiting salivating is the weekly Outside Key Reversal [OKR]. Just like one swallow does not a summer make, nor does a single bar necessarily reverse a trend. It may lead to a trend reversal, but further proof of confirming market activity is required.

What is interesting about the weekly chart is the location of current price activity within the channel. It is not reaching the top of the channel. The OKR is occurring at the mid- point of the channel, generally a sign of a weakening trend. An important issue with that observation is the fact that price also failed at a similar mid-point back in September of 2012 and was still able to keep the trend intact.

It is simply a piece of information of which to be aware.

An OKR also developed on the daily chart, last Wednesday, 3rd bar from the right. The volume was exceptionally strong. Volume was also strong the next day, with a lower high, lower low, and lower close, but note the location of the close. It was at the upper end of the bar, and that is the market telling us that despite the increased volume and effort to drive price lower, buyers were in control by the end of the day.

If an OKR at a [potential] high is a sign of weakness, more weakness should follow. The exact opposite happened, as noted on Thursday. This reflects the power of a trend and how it takes a lot of effort to reverse it.

Friday’s close showed a drop in volume, and that equates to a lack of follow-through selling pressure. The upper end close shows buyers still in control. Unless and until weakness enters the picture, one has to respect the trend. If long, one would want to be moving up stops on all stock positions for protection, in case a turn does develop.

As for being short, it may be appropriate for individual stocks that have been under- performing the current market rally, but there is no reason for shorting the market at current levels. What can never be known in advance is how future price activity will develop. The trend, [and Fed effort], may not be over, and based upon how the market has been up, up, and still up since September 2011, it is a message not to be ignored.

If more weakness enters the market next week, or sometime soon after, there will be ample time to take a short position when a turn in trend says it makes sense, to then make dollars from that side of the market.

One interesting piece of factual information is the last two times the S&P traded at an all-time new high and reversed downward to close more than 1% below the high were at the March 2000 and October 2007 highs. Will the same hold true this time around? If it does, we will see market weakness to substantiate it.

Let the market be your guide. It never disappoints, unless its message is disregarded.

By Michael Noonan

http://edgetraderplus.com

Michael Noonan, mn@edgetraderplus.com, is a Chicago-based trader with over 30 years in the business. His sole approach to analysis is derived from developing market pattern behavior, found in the form of Price, Volume, and Time, and it is generated from the best source possible, the market itself.

© 2013 Copyright Michael Noonan - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Michael Noonan Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife