The Ominous Three Birds Crapping On A Wire Pattern–Should We Be Concerned?

Random Thoughts

It’s important not to make big predictions as long as a market remains stuck in a range. As I preach, towards the bottom of a range things will look a little ominous and towards the top of a range it’ll look like an all clear. You have to wait, not anticipate. You also have to be careful not to confuse the issue with facts (yes, I own, do not confuse the issue with facts.com and dontconfusetheissuewithfacts .com). There are 1,000 reasons why this market should tank, but so far, it hasn’t. That in and of itself isn’t reason to buy but it does score as a positive. Now, before we start thinking too much, let’s get back to price.

Net net change is the simplest of all technical analysis techniques but it’s surprisingly often overlooked. We have a this count and a that count or an oscillator of an oscillator or a Three Birds Crapping On A Wire pattern that says we have formed a top as of tonight, tomorrow at the max. The bottom line is, sometimes the market just goes sideways. Where did the market close yesterday? A week ago? A month ago? Two months ago? and so forth….. Again, the indices haven’t made any forward progress on a net net basis since late last fall. Draw your arrows.

Let’s look at the scoreboard.

The Ps (S&P 500) gained nearly ½%. Ideally, I’d like to see it rally to at least to the top of its range to negate the recent Bowtie sell signal. But wait Big Dave, didn’t you just poke fun of the top pickers? Yes, I do have a sell signal but I’m not going to get too excited about it as long as the market remains in a range. You have to take things within context. If it triggers and the range breaks, then that’s a different story. Do pay attention but don’t act until the market tips its hand.

The Quack (Nasdaq) ended up a 1/4%–better than a poke in the eye I suppose. The action has it approaching the middle of its sideways range.

The Rusty (IWM) didn’t follow suit. It ended down 1/3%. It too remains stuck in a sideways range.

The sector action is mixed. As you would imagine, many are hovering at high levels like the indices themselves. Obviously, new highs would be a good thing and marginal new lows would be concerning.

Some areas have woken up.

The Foods are fighting to get back to new highs.

Drugs were lower on Wednesday but in general have remained in an uptrend. At the least, their relative performance has been decent lately.

Health Care Plans jumped to new highs. It doesn’t matter whether you like or hate what’s happening politically here, the market seems to like it. Believe it what you see and not in what you believe.

Gold and Silver stocks took a breather after probing higher but so far, a bottom still appears to remain in place here.

Telecom seems to be waking up nicely.

The Energies appear to bottoming but it’s way too early to call a bottom here. Wait for signals.

So what do we do? As long as the arrow points sideways there isn’t a whole lot to do. Pick your spots very carefully. Make sure the sector is trending (e.g. Healthcare, Drugs) or forming an emerging trend (e.g. Gold, Silver). I don’t see a reason to rush out and short just yet—again, let the market tip its hand first. As trend followers, we’ll always be a little late to the party. Regardless of what you do, as usual, honor your stops on existing positions and wait for entries on new ones. This will help to mitigate damage and avoid new trouble respectively. Longevity is key.

Best of luck with your trading today!

Dave

P.S. Chart show today. Without you, there is no show. So, be there or be square—unless of course you’re busy saving lives, building buildings, repairing automatic transmissions, or doing other great things. Click here or see the countdown.