I will show you those charts tonight to give you some idea as to what they look like technically. They are really fabulous charts that show bullish engulfing sticks. You rarely see sticks like that, but then again, how often does the world get flooded with liquidity from all the head honchos around the world. Very impressive sticks that usually, not always, but usually, lead to a follow-through in the weeks ahead. Never a guarantee as anything can hit on the news front that won’t be met favorably by the world markets, but you have to like what you see from a purely technical perspective if you’re bullish in nature.
We started out not too great this week, but nothing bad, and then got the big news from the world banks with this creating the massively powerful weekly candles you’ll be able to view this evening. It’s now important for the market to hold most of those gains if it spends a week, or so, consolidating things. It must not flash a big reversal back down. If it does, it tells you things are not going to go well for the bulls. That the weekly candles would have been nothing but a head-fake.
The good news that tells me things are good is how the things went up. Great advance-decline line. Fabulous volume. Great internals across the board. While this never guarantees anything, it does set-up a good risk reward for the bulls. If the advance had been on average volume, etc, then we would not take the candles as seriously. But when you do get the necessary ingredients as confirmation, it makes little sense to ignore them. While it seems hard to believe we can move higher based on fundamentals, you have to say the bulls have the edge short-term.
If we study the short-term 60-minutes charts you have to love what you see if you’re a bull. Here’s why. When markets are less favorable as they were earlier in the week, oversold stays oversold with oscillators winding up with little price appreciation. Once they move high enough away from oversold, more intense selling takes place. In this case, we have things moving the other way. We started the day very overbought on those short-term oscillators with stochastics near 100, and the RSI in the mid to upper 70’s.
The markets finished dead flat, yet, the RSI’s are now roughly 58, and the stochastics are below 50. Lots of unwinding, and there could be a bit more, but with absolutely no price depreciation whatsoever. This is how markets act when things are more favorable to the bullish case short-term. The wrong news could change the playing field, but this was a nice change in character once the liquidity program was shoved down the world’s throat. The market surely likes it for now.
When the world gets hit with massive quantities of liquidity, you try to look at the past to understand what’s possible. But that’s always dangerous to do. Things rarely repeat themselves very much as things are always evolving around us. So all we can do is play what we see and not spend too much time taking guesses, because that could skew how you approach the game. If you get too tied into a belief system, you might play with emotion rather than just simply playing what you see.
There is no way to know what’s coming, so my suggestion is to have an open mind and know that in this crazy game, anything is truly possible. It could last days or months. Who knows, and really, who cares. You shouldn’t. Play what we see, and right now what I see is a market that likes what it sees. That’ll change at some point, but for now, it says don’t fight it. Not that we’re blasting up. We’re not likely to do that at all. Just that things look decent for now.
Peace,
Jack
