As opposed to the market which has been dozing peacefully for two or three weeks, the commentariat (especially at marketwatch) has been baying at the moon like bloodhounds on a scent. Howling for reasons that the crash will begin any day, that if not a crash, a “correction”. In this context it is worth reminding readers that over the past month of so we have ventured based on our back of the envelope technical tools that 1525 was a feasible target for prices. In fact that has happened. In fact we don’t feel like that is the best picture of the past weeks –that picture is the Dow.
The last several weeks are represented by congestion. While today’s action is strong we remain in the pattern, but today is encouraging. What is more encouraging is the entire annual pattern. Because what we are looking at is the formation of a powerful base to impel the market higher. The PnF system reflects that fact.
As can be seen from the graphic (no link available) the PnF system looks for 16400. We do not find that unbelievable. What we find unbelievable is the US Congress, to whom we can ascribe blame for the behavior of the market for the last three weeks. The market tiptoes upward gingerly assuming that Congress will not sequester the economy. Cross your fingers.