Header Photo artwork credit to RUSH and Hugh Syme
MARCH 23, 2014 No one actually predicts with 100% accuracy what the markets will do next, but with a little help from the charts, we may gain some idea of a likely path they’ll take. In the last Report the $USD “Popped” and I mentioned that it may pause when it got to the 50sma & go sideways (Chart 1), before resuming higher. So far – that is playing out (Chart 2). What could that mean…?
For starters , a strong Dollar could hinder a strong market advance. DO we see any signs that the Equity Markets ($SPX / $DJIA for ex) may be in need of a ‘rest’ , or even a decent pullback? Notice how High volume reversals off of the Top have often resulted in such a “Dip”, even dropping below the 50sma . We had a High volume reversal on Friday .
The weekly chart for $SPX :
1. Overbought on the full stochastics 2. Hasn’t been reaching the top trend line and 3.The MACD is weakening.
Prior dips on the weekly often lasted more than a couple weeks , dropping down to the lower trend line (or sideways to it) before putting in a nice reversal candle.
What about the Dow Jones Industrial Avg? In my Humble opinion, it too looks more likely to dip into a correction , Either to build steam for another move higher , or a deeper correction. Relative Strength is not strong (R.S.I.) These charts seem to match a move up by the Dollar, however they have also run up together in the past, so we will have to wait and see .
While we are here…I posted that STEEL / STEEL stocks looked very bullish to me last week. Lets follow up with 2 charts and the brief commentary that so far, they still look very bullish to me . Notice that STEEL rode the 50sma last fall. Then it broke down and became resistance, FRIDAY it POPPED back above it with VERY STRONG BUYING. Steel stocks also are Bullish I.M.O. (See AKS below, STLD, X, SCHN, GSI )
Thats all for now, we will have to wait & see what the Markets bring to us this week. Reminder: ANYTHING can happen and things can change fast (with the Global economy ,”situations” like Russia and the Ukraine, etc. ). Stay Frosty!
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