"Hey JW - What's Your Outlook On The Market?"

Today I received this email from a student who took our class last month. I thought some others might enjoy the response:

from student:
"whats your outlook on the market? will we continue to rally? sell-off tomorrow?"

john


Response:
I think this is a short term retracement. How long it will last? According to dow theory 3 days to 3 weeks. Today would actually be considered day 3 because it started on Tuesday.
I expect to see a retracement to the 20 day EMA. Look at the behavior on 1-28,29 and again on 2-6 thru 2-10. It's typical retracement patterns.


One thing that may be added here is MACD is crossing over indicating a bullish move is impending. However there are a few things that could easily stand in the way of a major bullish move.

1) We're running into the 20 Day EMA. That often will act as resistance. Also note this is very close price wise to the 20 day SMA used in the Bollinger Bands.

2) A brief check of the ADX trend indicator shows this is a weak trend if a trend at all.

3) If tomorrow we do continue a rally the resistance coming up at 7500 will likely be a pretty strong resistance.


All that to say. We COULD be entering a bullish move but it's a bit unlikely. The mostly likely next move is either a retracement tomorrow (Friday), or a run up to 7500 before it turns and continues a bearish move.

Add to this basic technical analysis the choppy geo-political environment and I do believe it's a bit pre-mature to call this a bullish set up. Let's give it a couple more days and see if any new signs show up. If so I'll update this post. Until then - Trade any bullish trades with caution.

Happy trading.

J-Dub