Now Is Time For Caution September 20, 2013
Posted by Tom in Thoughts.Tags: market analysis, stock market commentary, technical analysis, Wyckoff
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As the lyrics in the song “A Bad Moon Rising” . . . . . “I see Trouble On The Way. Looks Like We’re In For Nasty Weather”. Well, that could be, and here are the reasons: 1. We’re getting very close to the top of the (purple) trend channel that goes back to November, 2012; and we may just fall shy of hitting it, not a healthy sign. 2. Look at the volume yesterday and today (Friday) circled in green. Increasing but the bar spread (distance from the High to the Low price) is small & compressed. Translation: all the buying is being met with selling, supply is coming into the market, not a good sign, possible Buying Climax. 3. Lastly, my stocks scans are weak, in that there was only one possible buy candidate tonight. Unusual & not healthy.
So what is an investor to do? Well two days does not a trend make, so we get real cautious in here, honor our stops and watch for additional signs of Distribution (selling). Now this could be just a couple of days affair. Folks are nervous about a government shut down, interest rates, et al, so I would not over react. But it would not surprise me to see a correction to around the 3650 level (lower blue line) . . . something short and violent just to scare the Hell out of everyone . . . . and give the “smart money crowd” a chance to reload what they have been selling.
Also I keep in the back of my mind that we’re nearing the end of the (reporting) quarter. I know many managers have not been in this market and their performance has suffered. (Didn’t you know? September is always “bad”; not true!) A “nice drop” right before the end of the month would bail them out, plus give them a re-entry opportunity. I’m not cynical, that’s just how some of these folks make money.
So be extra watchful next week. Watch the bar spread and the volume, a big spread with a weak close on heavy volume will confirm my suspicions. I hope I’m wrong, but I won’t wait very long to find out. I’ve got some nice profits this quarter and I don’t want them to slip away.
Take care and have a (very) good week. ……………. Tom …………..
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