Thursday, April 10, 2014

Looking at how the bull market can extend itself into late April or early May

While it is certainly possible that the bull market has already peaked, discipline requires me to look around to find any possible escape paths for the herd lest it slip by while I am not looking.  If the market breaks down right now then it will lose another chance to pile onto the truth of Walk Away In May on a bad January Effect year.  The market loves its lore!  So how does it get to continue the bull without actually going much higher?

The chart below shows one way for it to happen.  So this is interesting to me because that middle bit between 3 and 4 is not 1-2-3-4-5 but rather more like a-b-c, exactly what one should expect from a triangle.  A bounce from today's close that goes any higher than 16460 would make this model my top candidate. In any case, that model, should it play out like as shown below, should peak between DJIA 16700 and 16800.  This is just the kind of tricky action that would fool the maximum number of shorts and longs.

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