Action right now reminds me a lot of August of last year. Despite having 3 separate peaks that painted bearish daily divergence, the index gapped up relentlessly out of a shallower channel that had formed in the previous months as a result of a few pullbacks. The exact same thing is happening right now.
I'm expecting this leg to top out next week when price taps the top of that red channel. My hunch would be sometime Tuesday or possibly Wednesday on a gap up, but with that gap at the end of the wedge, it wouldn't surprise me to see a Friday rally fill the gap. Either way, expect a draw down to 285 before this charade keeps chugging. The fact that Trump has given a "several weeks" timeframe for a trade deal means we probably still won't see any panic selling and chances are good that the index will at the very least try for a double top.
Regardless, this RSI peak coming next week will probably be our highest for the next month or so. Earnings in the next month or so simply won't justify some of the current valuations we have right now. Unless the Fed cuts rates, I think the peak after the one that gets painted next week will be the high for a few months. Having said that, I wouldn't even bother entertaining the idea of a crash until we have some finality on the China trade deal. Fully expecting futures to be pumped and regurgitated "trade news" to prop up this scam for at least Monday and Tuesday. That's what makes this market frustrating, it's difficult to short, but to long it you have to basically acquiesce to being part of a ponzi scheme where sentiment is driven on purely price, speculation, and fluff news as opposed to fundamentals.
I'm expecting this leg to top out next week when price taps the top of that red channel. My hunch would be sometime Tuesday or possibly Wednesday on a gap up, but with that gap at the end of the wedge, it wouldn't surprise me to see a Friday rally fill the gap. Either way, expect a draw down to 285 before this charade keeps chugging. The fact that Trump has given a "several weeks" timeframe for a trade deal means we probably still won't see any panic selling and chances are good that the index will at the very least try for a double top.
Regardless, this RSI peak coming next week will probably be our highest for the next month or so. Earnings in the next month or so simply won't justify some of the current valuations we have right now. Unless the Fed cuts rates, I think the peak after the one that gets painted next week will be the high for a few months. Having said that, I wouldn't even bother entertaining the idea of a crash until we have some finality on the China trade deal. Fully expecting futures to be pumped and regurgitated "trade news" to prop up this scam for at least Monday and Tuesday. That's what makes this market frustrating, it's difficult to short, but to long it you have to basically acquiesce to being part of a ponzi scheme where sentiment is driven on purely price, speculation, and fluff news as opposed to fundamentals.
Comment:
As expected, we're gapping up to try and close the gap near the ATH. Take a look at the AAII % Bull-Bear Spread chart (ycharts.com/indicato...aii_sentiment_survey). It's near the 20% mark which has signaled an imminent pullback. I'm expecting some kind hangman candle today w/ a rally in the afternoon after an initial drop. Exhaustion gap comes 1st half of next week. My hunch right now is we pullback from 291.25-291.50 based on where the fib retraces lines up.
Take a look at the targets for this crab pattern. I lined up 290.75 as a hypo target because the retraces made sense as to where they line up. Again, note how the index hit the postulated high as late as friday at the apex of the wedge.