DAILY MARKET RECAP
Wednesday June 1, 2016
The following is be used for Informational purposes only. The charts are fact, however my interpretation is an opinion which I am sharing with readers. None of this is a recommendation to buy or sell anything. You must do your own due diligence.
Key Developments :
- Another bearish pattern trapped as the dip continues to be bought.
- Must focus on the two bullish patterns first and foremost until they are invalidated
I tried a cute short overnight last night, as it looked like we were forming a right shoulder for a move down to 2075. That was quickly invalidated this morning despite the gap down and took me out for a small gain. I showed how I traded it in the mid-day refresh (here). My rule is higher low, higher high above bearish neckline = cover.
The only bearish thesis I can come up with is that this is a diamond top formation. Which it very possibly may be, but would need to take out today’s low to confirm a reversal. So we will watch that closely.
The bullish thesis is as follows.
1) On the larger picture, A cup/handle formation targeting ~2400. This has not triggered yet, but also has not been invalidated, so it must be on our radar.
2) On the lower time frame (30 minute), we are forming a cup/handle as well, which is a pattern within the handle of the larger pattern above. Taking out the April highs will put this in full motion targeting 2163 which is a new All Time high.
3) Let’s also keep an eye on this potential inverse H&S on the DJIA.
The Bottom Line:
I am not predicting a breakout. However, the problem for the bearish thesis is there is there really is nothing bearish on the radar beyond what is possibly a diamond top formation. Additionally, there is far more bullish price action than bearish price action in the charts I am looking at. We all know that can change, and we will react to it, but to just short blindly into an uptrend is not my strategy. However, I remain flat and cautious here mainly because we are too close to resistance to be pressing long, and no evidence of a reason to be short (yet anyway). I will let the market digest and decide where it wants to go and join it. As I always say, no edge, no trade. However watch the price action described above to see if any of these mainly bullish patterns can trigger.