Waiting for confirmation … or Godot

http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=1&mn=0&dy=0&id=p20970412253&a=266691158

It is impossible to look at this chart and see anything but bull market going to new highs.  At the same time the breakout above the April highs waits to be confirmed.  Good practice consists of buying breakouts, and especially new highs.  Contrarians take exactly the opposite stance, selling these breakouts, knowing that resistance lurks just over new highs.  That is why we so often see the breakout “throwback” to the breakout line.  Magee said that trendline penetrations (which is what a breakout is) are confirmed when prices exceed the line by 3%.  In the Dow that is 13738 and in the SPX 1464.  The Dow is not quite there yet, but the SPX has confirmed.  We will be adding on to already profitable position as we evaluate this week.

http://stockcharts.com/h-sc/ui?s=TLT&p=D&yr=2&mn=0&dy=0&id=p88954422605&a=261274354

It says here that the party is over in bonds.  We have been saying that for some time and this is proof of the pudding.  Fundamentally we find it hard to believe.  The safe haven is over?  The world is returning to normalcy?  Nevertheless we will be putting on a small short.  Just to prove that we read our own analyses.

http://stockcharts.com/h-sc/ui?s=GLD&p=D&yr=0&mn=5&dy=0&id=p96388783504&a=255869372

Gold is the one that is really awaiting confirmation.  A strong continuation after a flag is disconcerting to us.  So we collected our profits, went short, closed the short and went long (which we are now) and uneasy — from trading standpoint.  We may have been too cute by half.  Whatever.  A sensible stop here is 164, SCO.  (stop close only).

More on stops shortly.  Don’t fall asleep.

Next PostRead more articles

Leave a Reply