Once in a blue moon (This is the month.) (Or was it last month? Not important.) somebody says something we find worth considering. Actually maybe once in two or three blue moons. But we do have some respect for Birinyi who just knocked bear hopefuls in the snout, and said something persuasive — that there are a lot of worn out ideas and indicators out there. Here’s the link:
Readers probably know that we disdain all indicators. Price alone is necessary to analyze the market. All that other stuff is just the market playing a shell game with you. That doesn’t mean we ignore market facts. We pay attention to them like a lamb pays attention while walking through a tiger-infested jungle.
Birinyi not only disparges old tools, he also predicts an S&P price of 3200 in the next two years. Our crystal ball doesn’t reach out that far, and besides that predictions give us shingles. We don’t mind analyzing the chart for possible targets but predicting the future is best left to Hollywood. That said if we just run a conventional E&M analysis of the SPX right now we can see a potential 162 point move in the present formation. That would give us 2296 on the upside and 1810 on the downside when we clear the present sidewave. Interestingly, the upside target squares with the PnF chart which looks for a target of 2299.
http://stockcharts.com/freecharts/pnf.php?c=%24SPX,PWTADANRBO[PA][D][F1!3!!!2!20]
Now let us discuss timing. Birinyi’s target, and our flogging old TA techniques, are subject to the present condition of the market. I.e. we have to get out of this sidewave before we can go up or down.
And that is not looking propitious. The Dow has just pulled off a rare trick.
http://stockcharts.com/h-sc/ui?s=%24INDU&p=D&yr=0&mn=9&dy=0&id=p88565451055
Seven days down. Most unusual. We looked at the components of the industrials. A sorry spectacle.
Only 4 or 5 stocks were worth a long trade. The rest were in down trends or were too weak to hold their heads up. This, among other facts, casts a pall over the market. We are not going to predict the direction of the breakout here but it doesn’t look rosy. Before we see 3200 we may see some blood. On the other hand the next sell off in the market should represent a primo buying opportunity. At the moment we would certainly wait for a resolution of the present pattern before making any long commitments.