How Professional Traders Respond to All-Time Highs

The technical analysis below reflects my view of the U.S. stock market in light of this week's developments.

In chart 1, the $QQQ is shown to have broken above Tuesday's '5 percent day' range, and Wednesday's rally almost tagged the mean of distribution #2. Hence, a move north of 118.75 ought to be construed as a second-chance buy signal. Furthermore, any event-driven down move attempting to test 117-117.40 would be a gift. 

(My plan is to sell 117/116 put spreads expiring weekly, for the next four weeks.) 

Chart 1

Referring to chart 2, the Dow Jones Transportation average ($TRAN) is well on its way to the '1.618 AB = CD' milestone. Should it subsequently pull back to the breakout point (point X) indicated by the dashed red line. a significant buying opportunity should then present itself.

Chart 2

As for the Dow Jones Industrial Average ($INDU), this week's break above the Andrews Pitchfork channel is reminiscent of a similar feat by the Nasdaq Composite Index ($COMPQ) back in 2013. This is depicted in chart 3. Yes, November did register a TD Sequential Sell 13. But this does not necessarily portend an imminent reversal (i.e., TD Risk is a 1,000 points above current levels). In fact, the underlying conditions of the stock market remain quite favorable for the bulls despite last week's selling action (i.e., in hindsight, it was a rotation coupled with end-of-month profit taking). 

Chart 3

The Nasdaq Composite Index ($COMPQ), which is far more representative of the market than the Nasdaq 100 ($NDX), has already surpassed its September 2016 high, implying green wave 5 is still underway, as depicted in chart 4. This wave analysis has nailed every move since 2012, and I shall continue to rely on it during moments of doubt. 

Chart 4

The Russell 2000 index ($RUT) continues to make new all-time highs, and an index of 2,000 constituents ought to be trusted. Predicted back in 2013, the 1,380 target shown in chart 5 is finally a stone's throw away from current levels. I'd keep a close eye on it.

Chart 5

The $SOX instilled reasonable doubt in me last week, given the selling intensity. Having almost fully recovered during the last three days, I predict the 900 level will be taken out in the coming days. And yes, I do acknowledge the impending TD Sequential Sell 9-13-9 due in January 2017.

Chart 6

The Nasdaq Banking Index ($BANK) is on a tear. Having surpassed the Alt BAT's  '1.13 XA' milestone, I see it headed towards the 3,900 level before any chance of a significant pullback. Chart 7 depicts a bearish CRAB with a much higher objective, which I believe will subsequently usher in a major correction.

Chart 7

 Finally, all major S&P sectors are gaining, a strong testament to this rally's breadth.This shall continue until otherwise noted.

Chart 8

Trade Smart,

Peter Ghostine (@peterghostine)

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