Currently the 6th time in one hundred years the DOW has been as overbought on the RSI. In 1944 the DOW rallied 3.4 % higher first, then pulled back 4.5% yet in the other 4 times, the DOW pulled back 4-6% then had an upside bias for the next 2-3 years, where the DOW rallied 89% - 17% - 49% - 118% - 82% In each period after the rally finished, the DOW had a correction of 20% or more. See charts below for previous similar setups. I am not advocating shorts or going long long at current levels. However, if price pulls back with noticeable support on the DOW around 4-6% similar to the past. I would use it as a long signal on all the indices for a potential 2-3 year rally that could take the DOW, SPX, RUSSELL and NDX much higher.
Well....in ALL the other situations S&P 500 '/e was not almost 28, The S&P 500 dividend Yield was not just 2%, the spread between S&P 500 dividend Yield and 10 years Treasury Yield was not 26%!! The US Debt was not almost 20 Trillion $... So...History is important if we consider ALL the factors, otherwise if we "win"....it's just cause we are lucky...
elp
⋅
@giloc, You could be correct. Time will tell. I am keeping an open mind to both upside and downside setups. On a weekly line chart, the SPX has made a 16 year rising wedge with decreasing volume with an upward breakout and what looks like at recent highs weakness to go higher, almost text book. However, to be a perfect pattern, I would want to see volume on a weekly chart breakout of the downward sloping channel, which it did not do. So, this could be a false breakout trapping longs at all time highs, which could act as fuel to the downside. Weekly chart
Looking at a monthly chart, yr 2000 highs to May 2015 highs fib series, price traded and found resistance at it´s -0.236 which will usually setup a pullback to a new highs to highs, May 2015- current highs, where the hwb is at 2200, which is also in confluence with previous TL resistance. Not being able to hold 2200 as support would not bode well for the SPX imo.
Daily chart with notes
I could be wrong. Going to keep an open mind on an upward breakout or a downward breakout.
giloc
⋅
@elp, Thanks! We are not here to compete each other...we are here to share our point of view and build something positive and help each other so...Thanks...I'll definitely consider your charts.
elp
⋅
@giloc, No worries, I agree, it´s great to share ideas. Please keep commenting!
elp
⋅
Looking at the Russell 2000 on a monthly or weekly chart, it´s made a nice broadening top. This pattern is NOT a bearish or bullish pattern. It can breakout in any direction, almost 50/50 either way. Where it breaks 49.6% upward and 50.3% downward, that´s 50/50 for me. I am looking at the Trump closing and actual Trump globex lows to hold as support. If price pullsback, which I believe it will, and the Trump lows support holds, this would be a "partial decline" which is a bullish pattern. Alternately, if the Trump lows break, then I believe the Russell could enter a larger correction. Keeping an open mind to both setups.
Another, quirky pattern I noticed. Price traded a 1.382 fib extension at the 2016 lows and current 2016 highs of the consolidation zone.
elp
⋅
Looking at the Russell 2000 US futures market. The Russell 2000 had the most volume (futures market) in one day at all time highs. For every seller equals a buyer which could get quite ugly in a stop run with trapped buyers at all time highs if price starts to break support.
Zooming out to a weekly chart. There have only been two previous times the Russell had this much volume. 1st was the week of 9/15/2008 where the Russell rallied into resistance two weeks before the year 2008 crash started. 2nd was at the 2011 lows. 3rd with price currently at all time highs the Russell has put in its third highest volume week, for the week of 12/12/2016 at all time highs. This could really ugly if price goes on a stop run.
Small caps lead this rally up. They could now be hinting at a possible pullback or correction, keeping an open mind.
elp
⋅
elp
⋅
Here is another possible setup I am looking at where the SPX is in some sort of rising channel/wedge. If this is the case then I would believe it would be an a b c down with an a b c up to finish some sort of something.
elp
⋅
The NDX cash market has made a rising wedge that can break in either direction. Here are two setups I have for a deeper pullback setting up a W3 well into year 2017
downward breakout chart
upward breakout with a small pullback setting up a W3 to the upside. I could be wrong 100%