Hello Traders!
Although last week the market didn’t move much, we still drilled up just to set record highs over and over again. This is quite understandable regarding the last fierce up weeks we had lately, but it seems that the market is feeling quite comfortable on this rally and looks to continue that, maybe with a different pace.
Let’s talk technical. Plotting the DIG_SmartPoint and the DIG_Pivot Break (These indicators are the products of ProTradingIndicators.com, available at TradingView within a monthly subscription) will reveal to us a text book uptrend chart, higher highs, higher lows, almost symmetrical moves repeating themselves over and over again. Despite the natural tendency to see a chart like this and scream “Overbought!”, we have to look on and rely upon the information that is handed to us through the chart. Yes, we are very extended, for a long period of time, but on the other hand there was also decent profit taking phases and overall the uptrend looks healthy.
On the Pivot Break, we have gone past the green line indicating a resistance level of the previous high pivot. This is obviously a Bullish sign. One concern though, is that since the low pivot of $164.50 (and the lower band of the DIG_SmartPoint) the prices have not retraced a notch, obviously, this retracement should come sooner or later, but the concern is that farther the prices go for a longer time without a retracement, deeper will be the retracement. For those of you who look for the most probable scenario, we can look at the recent resistance break as the last considerable milestone, turning into support. Within this week we should see a retracement back to that support level, and hopefully a bounce. If this scenario will materialize, the odds of the market turning back violently diminishes.
On another note, it is also very important is to see the numbers that came out, as we are in the earnings season. Given that 69% of all companies that reported earnings so far beat the analysts estimate (!). This is a very encouraging number for both the economy, the longer time frame investors and the market traders. We still have some numbers of big companies (Like Apple) that should come in and set the tone, but the idea is clear - The economy is in a very good condition, unemployment rates are not that horrible and earnings are setting records. Within that ecosystem, the recent fierce market rally comes down to a simple logic explanation, the market is in good shape and people think that at these price levels stocks are still a cheap asset.
Oil & Gas.
Our scenario of last week regarding the weakness of the USO (Oil ETF) has materialized in a form of the break of the $36.40 level, causing a steady price decline down to the $35.00 mark. This support level, which is a combination of multiple highs occurring early this year and the psychological effect of the 35 round number did the trick and held prices above. One thing to look at is the volume pattern in which the last 3 green days formed, which is a declining pattern. This volume pattern is not so bullish and might even tell us that the recent upmove is just a small correction, so that further downside action is probably the outcome for the short term.
Economic Calendar - This week we have some important numbers coming out.
Oct 29 08:30 AM - PPI.
Oct 29 10:00 Am - Consumer Confidence.
Oct 30 08:30 AM - GDP.
Oct 30 08:30 AM - CPI.
Although last week the market didn’t move much, we still drilled up just to set record highs over and over again. This is quite understandable regarding the last fierce up weeks we had lately, but it seems that the market is feeling quite comfortable on this rally and looks to continue that, maybe with a different pace.
Let’s talk technical. Plotting the DIG_SmartPoint and the DIG_Pivot Break (These indicators are the products of ProTradingIndicators.com, available at TradingView within a monthly subscription) will reveal to us a text book uptrend chart, higher highs, higher lows, almost symmetrical moves repeating themselves over and over again. Despite the natural tendency to see a chart like this and scream “Overbought!”, we have to look on and rely upon the information that is handed to us through the chart. Yes, we are very extended, for a long period of time, but on the other hand there was also decent profit taking phases and overall the uptrend looks healthy.
On the Pivot Break, we have gone past the green line indicating a resistance level of the previous high pivot. This is obviously a Bullish sign. One concern though, is that since the low pivot of $164.50 (and the lower band of the DIG_SmartPoint) the prices have not retraced a notch, obviously, this retracement should come sooner or later, but the concern is that farther the prices go for a longer time without a retracement, deeper will be the retracement. For those of you who look for the most probable scenario, we can look at the recent resistance break as the last considerable milestone, turning into support. Within this week we should see a retracement back to that support level, and hopefully a bounce. If this scenario will materialize, the odds of the market turning back violently diminishes.
On another note, it is also very important is to see the numbers that came out, as we are in the earnings season. Given that 69% of all companies that reported earnings so far beat the analysts estimate (!). This is a very encouraging number for both the economy, the longer time frame investors and the market traders. We still have some numbers of big companies (Like Apple) that should come in and set the tone, but the idea is clear - The economy is in a very good condition, unemployment rates are not that horrible and earnings are setting records. Within that ecosystem, the recent fierce market rally comes down to a simple logic explanation, the market is in good shape and people think that at these price levels stocks are still a cheap asset.
Oil & Gas.
Our scenario of last week regarding the weakness of the USO (Oil ETF) has materialized in a form of the break of the $36.40 level, causing a steady price decline down to the $35.00 mark. This support level, which is a combination of multiple highs occurring early this year and the psychological effect of the 35 round number did the trick and held prices above. One thing to look at is the volume pattern in which the last 3 green days formed, which is a declining pattern. This volume pattern is not so bullish and might even tell us that the recent upmove is just a small correction, so that further downside action is probably the outcome for the short term.
Economic Calendar - This week we have some important numbers coming out.
Oct 29 08:30 AM - PPI.
Oct 29 10:00 Am - Consumer Confidence.
Oct 30 08:30 AM - GDP.
Oct 30 08:30 AM - CPI.