New Highs Likely Today–Should We Start Popping The Corks?

Random Thoughts

You can’t get too caught in up in one day’s action, especially while a market remains stuck in a range. Things looked a little ominous last Friday with the Fed jawboning interest rates up. So far this week the market has decided to ignore that news and move ahead. True, Bonds and interest rate sensitive areas remain soft but other areas have shrugged it off. Before we get to these and other areas, let’s look at the indices.

After all was said and done, a lot more was said than done in the Ps (S&P 500). They ended in flatsville. I guess if you look at the glass half full, this action keeps them about 1% away from all-time highs.

The Quack (Nasdaq) caught a bit of a bid, ending up just over ¼%–better than a poke in the eye I suppose. This action has it’s a gnat’s eyelash shy of 14-year plus highs. If they can follow through from the strong futures, we’ll see those new highs today.

The Rusty (IWM) was down a smidge. This action reflects the internal mixed action. Some areas did okay and some areas didn’t do much.

As mentioned recently, I’m “old school” when it comes to looking to the Semis for market confirmation. They broke out to new multi-year highs on Wednesday. So, this scores as a positive.

Retail also managed to close at new highs.

Interest rate sensitive areas such as REITS and Utilities are still looking dubious but I wouldn’t worry too much about this as long as other areas can continue to improve.

Crude Oil (USO) probed lower but managed to close well off its worst levels. So far, a bottom still appears to remain in place here. Keep in mind that this is a “Pioneer” pattern (Pioneer First Thrust) and like the American Pioneers you’re either going to get the gold or arrows in your back. In today’s chart show I’m going to talk at length about emerging trend patterns, especially as they relate to efficient markets such as commodities and Forex. Be there or be square—unless of course you’re too busy saving lives, building buildings, repairing automatic transmissions, or doing other great things. Note: full disclosure, we are long USO.

With the indices on the cusp of breaking out to new highs, should we start popping the corks? Settle down Beavis. Let’s not start kissing each other just yet. As usual—wait for it—follow through will be key. Wait to see if the indices can break out of their ranges and stick. It’s not as easy as waiting for a market to simply cross a line in the sand. I guess if it was everybody would be doing it.

So what do we do? Again, follow through will be key. In the meantime, if individual areas like the Semis and Retail can continue higher then we could see setups there soon. For now, those areas that can trade contra to the overall market such as the Energies might be worth a stab. Do wait for entries based on recent weakness. I’m going to flesh all this out in a lot of detail later today in the chart show. Call in sick. My world tour kicks off next week so this one will be the last one for a couple of weeks.

Best of luck with your trading today!

Dave