Premarkets were down -0.10% and quickly dropped to -0.30% at the opening. The opening looked like a dump and pump as the averages melted back up again to the opening values on moderate volume.
By 10 am volatility was king this morning and a lot of ‘Sheeples’ were getting fleeced as the averages turned back down after a brief bear trap. Caution, look for another attempt at the high water marks.
The short term indicators are leaning towards the hold side at the open. The all important signs of reversal, up or down, have not been observed so we are mostly, at best, neutral and conservatively holding. The important DMA’s, volume and a host of other studies have not turned and that is not enough for me to start shorting. The SP500MACD has turned up, but remains above zero at 8.23. I would advise caution in taking any position during this volatile transition period although Barchart.com shows a 24 %sell. (Remember this has been negative for weeks.) Investing.com members’ sentiments are 69 % bearish.
In looking at the 50 DMA, the current SP500 opened way above that line and the small caps remain above the 100 DMA. I can not see, as of right now where those large cap MA’s are rolling over to indicate any permanent bear run but the falling small caps are a real worry. The NASDAQ 100 DMA is about to cross over the 145 DMA and the small cap trend is sideways.
Bottom line here is that I have not seen any serious bears jumping out of the woods just yet, although I am VERY concerned that ANY minor correction could turn nasty in a heart beat. One significant signal would be daily losses in any of the major averages that go over the ‘magic’ 3 % and then you need to pay close attention to risk-off tactics. Any correction over 6% would be an additional signal and I can’t see having one without the other.
In Lance Roberts article he asks, Is The Market Consolidating Or Topping?
There are two ways to look at stagnation in the markets. It is either a consolidation process that works off an overbought condition which leads to further advances, OR it is a topping process that leads to a market decline. Discerning which process is currently “in play” is critical for investor decision making.
Let me be clear. I am not stating that the current consolidation processwill absolutely collapse into a sharp correction in the months ahead.However, I am stating that the current environment is more similar to past markets which did correct, than not.
While it is certainly possible that the markets could ratchet higher from here due to the “psychological momentum” that currently exists, the likelihood of a runaway bull market from here is remote.
