Will it be any different this time?

  • Posted by
  • on January 26th, 2014

 

At the start of any correction the question on everyone’s mind is ‘will this be a buyable dip?’   We think ultimately the weekly 20sma that we posted on Thursday will tell the tale.  Note how it held on every correction in 2013.

That $SPY 177 area will be on many radars — however do note that it’s a weekly chart, so it’s more a zone (and previous corrections didn’t turn on it on a dime either — you need to give it 1-2 bars/ few points).   If the weekly 20sma does not hold in the next few weeks then we would say yes, finally the 2013 pattern is broken and we will finally lose the smooth bull trend we enjoyed for all of 2013.   This doesn’t mean that we enter a bear market, it just means that the market would become less forgiving and more volatile.

 Chart20140126101911

Do note that this is the longest trend we’ve had in between the upper bands since the late 90s.  The 2013 20sma weekly pattern ends near 177 but the longer 2 year pattern within the upper bands wouldn’t be violated until 173.

Chart20140126102449

Anyway, we’ve enjoyed a decent intermediate trend, so keep the weekly/monthly charts also in perspective.   Of course even if we test support, nothing goes straight down (and a gap up Monday wouldn’t surprise us either) and there are a lot of active trades to be had in between.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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