There is no perfect vacation for a trader. So let me drop a quick note.
The trading range I had expected is well underway. And we did bounce on the “Options Expiration” pivot I talked about on Sunday night.
The Navigator shifted back to a buy signal at 4531.75 on Monday morning. You can see the turn on the daily chart above, and we saw some follow-through yesterday and today. Here is a granular look at the buy signal and turn:
The Founders Group is on vacation, so we are not partaking in the run these past few days. As we say at the office, there is always another train leaving the station.
We are now at the top of the trading range – or close to it. Given the brick wall that we have seen at 4700 these past four weeks, it is doubtful we will see a breakout. Also, we are near the Weekly Expected Move High of 4708 on the cash index.
That we might not break out is just an opinion, of course. But the statistical probability of a breakout failure is 80%. We will see how it goes, but I would not be surprised to see another loop back down. Price action always rules opinion anyway.
A lot of this price movement is short covering. Sentiment got too negative for further declines, as I pointed out last Sunday. And we always have to be mindful of manipulation in light, holiday volume. So it is not advisable to jump in at the top of this range.
Perhaps the market is in the process of forming an ascending triangle.
We know from history that when Fed policy begins to shift, the market tends to stall into a trading range. Markets don’t typically roll from bull to bear immediately. Usually, a trading range precedes the transition.
Anyway, this market has yet to violate the recent bull uptrend and may find support again on the trendline if we loop back down. Therein lies your makings of an ascending triangle.
The bullish price action belies all this talk of crashes and such that I read. Nevertheless, I fully expect considerably more volatility in 2022 than we have experienced recently.
I hope this quick update keeps you alert as we get ready for the new year.
Again, Merry Christmas and Happy New Year