Tuesday January 19, 2016
Key Developments :
- Another gap up is sold
- SPX Still holding major support level at 1867
- No bullish or bearish patterns really under construction or in motion.
The theme all year has been for the market manipulators to push the futures up all night so they can sell on the open. That theme continued after the 3 day holiday weekend. When you woke up and looked at the global picture, you went hunting headlines for an announcement of QE4. However, I lasted all of 2 mins after the open where the high of the day was set.
All that being said, it is constructive from a bullish perspective that the morning weakness was bought in the afternoon.
We can see the formation of the inverse H&S around 2pm which did trigger around 3:15 and acquire it’s upside target. We have not had a bullish pattern complete it’s upside target this year. If you go and look at Friday’s close, we had the formation of one, which triggered and failed with today’s gap up and dump.
Bullish Inverse H&S :
This being said, the charts just are not giving us much to work with. It is possible we are forming some kind of inverse H&S here above the 1868 support and completing a bullish pattern although constructive is not enough for me yet. We can also see we are trying to set a higher low, but that has not occurred yet, just a possibility at this point, but worth watching.
Additionally, the market remains very oversold, so in my opinion, very difficult to be pressing shorts, and very little price action to confirm, the market wants to take advantage of the oversold conditions to rally higher.
That puts me at least in a very neutral posture. If I don’t have a pattern to work with, I wait for one and that is where I stand right now. Direction will come for now, I preserve capital.
The Bottom Line:
The market is undecided. We have very little price action to work with in either direction. All we do know is the market is oversold. Without price action however, we will get chopped up, so we must remain patient for setups to form. There are times during the year where there is nothing to do. Today, was one of those days. How long that lasts remains to be seen.
Chart of the Day
If you gambled on NFLX today with a directional bias, congrats to those who won. When I want to play Russian roulette I go to the casino. There is really nothing to work with regarding NFLX at this point. Yes, it looks like a double top, but earnings kept it above there. Had it broken down below 90 on earnings, then we have a trade, but it did not. So for now, NEUTRAL.
Had you been in the gambling mood, the wise trader would have been getting long as it had an inverse H&S formation created today, that acquired it’s upside target. The problem, is we have seen even bullish patterns
roll over and fail after an earnings announcement. I personally don’t trade earnings regardless of pattern. I just don’t have an edge and I am happy to admit that.