Another day and nothing has really changed. We have our triangle tightening on each side here with now the lower short term high confirmed yesterday when Friday's low was taken out. A breakout from here is the way to play, which way of course is the magic question.
You can see the purple line which is the 30 Yr Bond over layed on top of the SP 500 prices here. As I have discussed in here, in the past when this type of sharp downward move in the Bond prices has accompanied very sharp stock price increases like this, we have had some nasty declines in stocks. By that logic, this little minor consolidation is not even a wiggle. We should go down much more than this by that pattern. I don't have a definitive read with the momentum oscillator here, although it is favoring the down side. It is not one of the patterns I typically trade with it, so it is not enough for me to take a position here.
Today so far, even though I do not have it pictured above, we are working on an inside bar up at this point. This is further tightening the range here for the breakout. If you look back closely at the chart you will notice how amazingly similar the current pattern in both price and the indicator is to that of late November. If this is any indication, we are heading sharply higher again. Net net here, most of what I look at says down, yet the most similar prior confluence of all these things says sharply up. When things like this conflict I don't trade. I might be able to guess right, but I don't like the results I get from guessing. I suppose it is possible we could get a brief down move that is a false breakout down, that traps bears, then they reverse this right back up and that is the power move. That is what occurred last November.
One thing to keep in mind, whatever the reason is, we have arguably the greatest rally in history going here and the bulls won't give it up too easily. We also "know" there is something underneath this market keeping it very strong, and they are not likely to back off from their current strategy any time soon. Tune out of the noise on the news, none of it makes sense anyway and it is often accompanied by huge biases as we all have certainly learned in the last 2 years. I will show what I do here and when, and I just don't know right now what that is going to be. My gut is that I will short this soon, but that is yet to be determined.
Here is the Bond market using the new tool that projects price direction based on a number of parameters that can be plugged into the software. No matter what I plug in we get a very bullish forecast. The Red squiggly line projects price, and it shows sharply upward ( due to scaling it does not look that sharp but it is ) no matter how I look at this. This fits into the bearish scenario for stocks, since they are trading inversely nowadays.
The area for analysis is what I captured that is shown in blue. It does not matter how I capture this the results are the same. I have not gone long yet, but I am looking to the long side here. This is an amazing tool, but although a majority of the time it almost exactly predicts things, there are times it is dead wrong. As a result, I do not trade off it by itself. It does though push me to look for something solid to confirm direction.
It does also appear that we have started down in many other markets and stabilized in the DX here. It does seem to me that we are getting a very bearish sentiment developing in the DX once again, which makes me want to get bullish there in general. I do not have any buy patterns yet nowhere near it, so I wait there.
Overall now I am looking for a stock decline, Gold decline, currency decline ( DX rally ). I am not sure about the Grains here or Crude. I mentioned recently based on the COT data, the Crude breakout could be a trap. We don't know yet if that is the case or not. That is weekly data, so it is not that timely.