Technicals | Sep 03 2014
Bottom Line 02/09/14
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 1905 / 1850 / 1815
Resistance Levels: New highs
Technical Discussion
'…. although if the 'buy the dip' brigade come out fighting it may well be 1900.0 that supports weakness.' So where did the most recent dip head to in the end ? 1905 before strongly reversing back to the upside. You just can't keep a good market down. Now I don't mean to sound hard to please especially with price back at all time highs, yet there is still scope for further consolidation to take place from here, rather than price just doing a V-shape recover off the recent dip. We'll discuss this more in our technical area below.
Reasons to remain longer term bullish (still caution shorter term):
→ Record low interest rates to remain and controlled extraction from QE is being extremely well managed by the Fed.
→ S&P 500 earnings well supported at this stage of economic cycle.
→ The IT sector is seeing ongoing rapid expansion and innovation.
'The measured move for a rising wedge is a return back to its start point – this has now been achieved as well as tagging the moderate line of support at 1900.0.' Yet in our last review we were looking for any reversal to be sold back into with our preferred stance being an a-b-c zig zag move lower into deeper territory. This has clearly not occurred so the flatter type pattern is now under the microscope. Our persistence that further consolidation is still going to be required sits with price being overbought on the dailies, strong Type-A bearish divergence on the weeklies, weak seasonality, plus the less likely scenario that a V-shape recovery off the recent dip is going to take shape. Then again what we are dealing with here is a strong cyclic bullish market. So we need to be prepared for anything.
Trading Strategy
If price just presses on north from here then so be it. We will miss a trading opportunity yet the facts are that right here and now, this is not a low risk opportunity worth taking on from our perspective. Yet if our analysis does prove accurate in relation to a flatter type pattern still needing more time to evolve, then our patience may well be rewarded over the coming weeks via a trading opportunity on the long side from lower levels. Another one for the watch list.
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