10 THOUGHTS THAT CUT THROUGH AND CLARIFY THE CURRENT MARKET PICTURE
Previous ranges have been obliterated. We seem to be on a quest to define an entire new set of price ranges for the important market averages. All the meanwhile, most market participants seem to be obsessed with the idea of a pullback more than they are the journey that is at hand. Let's examine where the market currently stands to better clarify the picture:
- The Dow somewhat easily broke through a major generational resistance area in the 12400-12500 range. It is preparing to test another generational resistance area at 12850-12950. Should the Dow clear this level, breaking convincingly over 13,000, the game will be on in earnest for the bulls. More on this in the weekly chart review tomorrow.
- Timing of the break will also be important. If a convincing break of 13,000 develops before mid-March, the potential for a powerful move up in the April-May time period is substantial. If it breaks in April, then the potential for failure is that much more substantial. The timing variables are constantly shifting. I am watching.
- Speaking of timing variables, these two studies provide an excellent guidepost for timing this move based on previous results. I will point to them continually, as I believe they are extremely relevant to the current market. The first is the VIX study I posted some weeks ago and the second is the put/call study I posted some weeks ago. Both point to higher prices for the market averages. Both also show how investors cannot just depend on traditional analysis of these gauges to utilize them with any success. Those who just say the put/call is down to such and such so the markets must top or the VIX is down below X so the markets must be overbought are only looking at one crumb and forgetting that there is an entire cookie up above.
- The Nasdaq 100 is just chilling at a 10 year plus high in consolidation mode. If it continues to consolidate while the market catches its breath, the potential for a continued powerful move forward becomes that much greater.
- The relationship between a falling US Dollar and a rising equity market seems to exerting itself once again. This is most important for the bond market as this "synergy" will create a trend towards rising yields.
- The fact that bond yields have refused to participate in this market rally is a signal that a great majority of investors remain skeptical of the market. Whether you want to use this as a contrarian indicator or not is up to you. What is does mean is that a large reserve of cash remains on the sidelines that could provide the market with significant ammunition going forward. That move well above and beyond 13,000 could very well be fueled by the bond market.
- The powerful move taking place in gold and silver is a sign that the inflate or die trade is back on. It all ties into a declining US Dollar. And all of this feeds back into the bond market. Another sign that if this continues we will see a meteoric rise in yields.
- Phase 4 stocks have not made their traditional blowoff type moves that signal a top. Those calling for a substantial top here forget how valuable the action in Phase 4 stocks can be in gauging tops in the market. The speculative money has become more comfortable in the current market. It is by no means, however, euphoric in its action.
- The VIX is dead money for at least the next few months. There is a whole new group of speculative money that attempts to play the volatility indices. I think that most traders will end up regretting ever learning about instruments like TVIX.
- You are not supposed to understand the hows and whys behind market moves. The best moves that take place defy logic. The fact that so many consider this market move illogical is the best thing the bulls could wish for.
