A Brief Review Of The US Stock Market Part 3 of 3 (Daily)
Rational Summary
Alright, so lets put all this together and see if it gives us some Rational ideas to work with going forward.
1. Fundamentally, earnings are ok but a bit suspect considering two sectors (financials and commodities) will have poor comparisons to work with going forward. Conversely, consumers and industry should have more money in their pockets which hopefully translates into 'gadget' / infrastructure spending (keep an eye on AAPL, GOOG, TWTR et all for confirmation). We will know this has happened if the Fed starts to raise short term interest rates.
2. Technically, price has just tested a significant Fib extension target ('the golden ratio' or 1.618%) and those who took positions off the bottom should be seriously considering taking at least partial profits. Our internal momentum indicators are both overbought and potentially divergent so new 'investments' should be put on hold for the time being. Since volume and price have yet to show signs of topping, a 'blow-off top' up to the 200% Fib extension target is still very much on the table. Because of this too, I have yet to consider 'retracement' Fibs and will refrain from doing so until I do see more signs of a top.
Conclusion
We are in a bull market but that bull is getting old. Fed policy is changing and we should be aware of this. We still have a friendly Yield Curve and are far from 'three steps and a stumble' territory but we should be cognizant of the change. Simply put, United States of America Inc. isn't a broken economy anymore. A bullish resolution out of a consolidation here may set up 'trades' off the lower time frame charts heading into our anticipated seasonal peak sometime mid-year but make no mistake, this is a very old bull and looking rather extended. Investors should be long off the bullish resolution four years ago and slowly spoon feeding the market stock (sell half on a double et all). Traders should be riding the bull but making sure to have realistic targets and need to patiently wait for lower time frame bullish setups to confirm 'the golden ratio' was just a stop along the way to our 'ultimate target'.
Cheers all and good luck in following those trading plans,
Brian
aka The Rational Investor
p.s. if you appreciate my hard work and would like to help our cause, donations are greatly appreciated (1EBttA56cWsgtsZn83VGiNT8si7inZV5Z5)
p.p.s. if you are serious about working on your trading skills and may actually consider trading for a living, please take a moment and visit our Bitcoin related trading site at www.therationalinvestor.co Along with regular blog posts and member videos, we run a school to teach aspiring traders the basic essentials to trading for profit over the long term. From risk management, to strategic planning to crafting a personalized trading plan, our 12 week program's aim is to give you the tools needed to survive and prosper over the long term. While the school has a bitcoin theme, all principles of trading are applicable across all asset types and classes...a good buy is a good buy...
Alright, so lets put all this together and see if it gives us some Rational ideas to work with going forward.
1. Fundamentally, earnings are ok but a bit suspect considering two sectors (financials and commodities) will have poor comparisons to work with going forward. Conversely, consumers and industry should have more money in their pockets which hopefully translates into 'gadget' / infrastructure spending (keep an eye on AAPL, GOOG, TWTR et all for confirmation). We will know this has happened if the Fed starts to raise short term interest rates.
2. Technically, price has just tested a significant Fib extension target ('the golden ratio' or 1.618%) and those who took positions off the bottom should be seriously considering taking at least partial profits. Our internal momentum indicators are both overbought and potentially divergent so new 'investments' should be put on hold for the time being. Since volume and price have yet to show signs of topping, a 'blow-off top' up to the 200% Fib extension target is still very much on the table. Because of this too, I have yet to consider 'retracement' Fibs and will refrain from doing so until I do see more signs of a top.
Conclusion
We are in a bull market but that bull is getting old. Fed policy is changing and we should be aware of this. We still have a friendly Yield Curve and are far from 'three steps and a stumble' territory but we should be cognizant of the change. Simply put, United States of America Inc. isn't a broken economy anymore. A bullish resolution out of a consolidation here may set up 'trades' off the lower time frame charts heading into our anticipated seasonal peak sometime mid-year but make no mistake, this is a very old bull and looking rather extended. Investors should be long off the bullish resolution four years ago and slowly spoon feeding the market stock (sell half on a double et all). Traders should be riding the bull but making sure to have realistic targets and need to patiently wait for lower time frame bullish setups to confirm 'the golden ratio' was just a stop along the way to our 'ultimate target'.
Cheers all and good luck in following those trading plans,
Brian
aka The Rational Investor
p.s. if you appreciate my hard work and would like to help our cause, donations are greatly appreciated (1EBttA56cWsgtsZn83VGiNT8si7inZV5Z5)
p.p.s. if you are serious about working on your trading skills and may actually consider trading for a living, please take a moment and visit our Bitcoin related trading site at www.therationalinvestor.co Along with regular blog posts and member videos, we run a school to teach aspiring traders the basic essentials to trading for profit over the long term. From risk management, to strategic planning to crafting a personalized trading plan, our 12 week program's aim is to give you the tools needed to survive and prosper over the long term. While the school has a bitcoin theme, all principles of trading are applicable across all asset types and classes...a good buy is a good buy...