Wednesday, January 18th, 2017

Market forming a bullish pattern


After a major bull run where is the correction? I was hoping for a 5% to 10% downside… but it never happened as of today. The fact is not only we didn’t see a correction we are seeing a new pattern emerge in the last few days of trading. This is a classic textbook example from Bulkowski’s work.

The SPX is now believed to be forming a high level pennant. These flags and pennants form after a major ascend which we have seen lately, non stop back to back. After a major hike bulls and bears are not sure what to do and a period of indecision follows. The prices trade in a narrower range and until one side wins, and it is usually in the direction of previous trend, the market starts trading

If this was going to happen, we may see a break out to the upside. If somehow, the bears are able to push the market down, the pattern will fail, and you will have a somewhat shallow correction. The market gapped opened right after the Memorial day holiday, but couldn’t sustain the momentum, and sold off immediately. Today we had a gap open in the other direction, but couldn’t hold it down, and rallied back up, in all the major indexes.

The good news these days are very good news, and the bad news are still good news.

Tuesday, the home prices went up 10 percent or so in this new real estate re-emergence and the market shot up many points. The resurfing of real estate is now a major happy point for stock market operators. Many Hedgefunds, and investors from Wall street are now buying single family homes across the nation, and mostly in those states hardest hit by the great recession. Inventories of homes are very low are barely a 4 months supply in the pipelines. But this new found gold is making Wall Street a bit giddy.

The good news is addictive, the QE program has also left the market a bit giddy and after the earnings season, we have not seen a real correction these few months lately.

Trade with the trend unless its broken. Stay on the right side of the trade and make money. At least that is what we are attempting to do.

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