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As of 3:00 today, it looks as if the mid-term pullback is indeed over and that a new leg higher has begun. This leads us to bring up two points. First, you can again see how important it is to follow the signal immediately and making the necessary changes the night we issue a new signal. As of today, the morning after we issued the most recent signal of buy was the best entry into this new leg. The most recent situation also teaches us to accept a loss when necessary if your work suggests that a position should be reversed. We did have a small loss on the recent signal of sell, but when our system triggered a buy signal we knew it was time to accept that loss and move on. Many of our subscribers trade individual stocks in addition to following our systems. You can see how important it is to follow your methodology even if emotionally you will be upset about taking a loss. Remember, in the end it is not about being right more often then wrong, it is about being profitable and making the most money you can.
The first chart below is of QQQQ. As of 2:00 today, the advance has run into the horizontal support from two weeks ago, in addition to running into the uptrend line from the beginning of September. It is still possible that the advance that started last week is corrective and that the mid-term trend is still down. If this is true, we would expect another small leg down, pushing the ETF to the 50 day moving average. More likely the bottom is already in. To confirm this, we need to see a break above the most recent highs. Friday was also an outside day. A higher close following an outside day is extremely bullish.
SMH has moved above both its 50 and 200 day moving averages. Currently, resistance is in the 35 area. A break of the November highs will invalidate any possibility of a head and shoulder formation and will suggest that the mid-term bottom is definitely in. A break above the 36 level would be very bullish.
IWM is at all-time highs. The ETF has found support at the trendline shown and our indicators point to a strong break above the 79.30 area in the near future.
Most likely the mid-term downtrend has finished (as small and short as it was). It looks as though the stock market is ready for another strong push above 2006 highs.
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