Market Trends: Happy is as Happy Does

Buy, BUY, and BUY! Or maybe not . . .

Have you ever been to the ocean and built sandcastles on the beach or written words in the wet sand? Although thrilling for the moment, the tide will soon enough turn and the waves will begin to lap at your masterpiece until it’s reduced to history.

So, too, is the market. One of my earlier mentors often said, "The market giveth and the market taketh away." Although I grew tired of hearing it, his meaning has become ever clear in these turbulent times.

The era of investing is relegated to the pages of history. Now, enter the era of the momentum trader. Today’s market is ripe with opportunity for those skilled in navigating the adrenaline rush of whipsaw moves.

However, like all things market related, this will change. It’s kind of like surfing. You paddle out to the most likely spot to catch a wave and sit. When trading the markets, patience is key: patience and knowledge. If you take a wave too soon, it will spoil your ride. If you don’t have the skill to catch and ride the big waves, best gain those skills in safer waters.

This week’s price action gave us penetration of overhead resistance in all four indexes tracked in this column. One index stood out: the NASDAQ Composite. The NASDAQ continues to lead the run into higher ground, finishing the week registering an uptrend across the board on the daily charts. The Long-term Trend for the NASDAQ daily has now turned green.

On the weekly chart, the NASDAQ managed to turn the Mid-term Trend green, turning in a convincing performance on Monday and maintaining those higher levels on Friday.

The other three indexes, although turning in great performances, were more timid. They did not manage to change the colors on the GMT (see GMT Indicator in right sidebar).

The most convincing move this week occurred in the NASDAQ Composite index. On the below chart, take note how this week’s bar leapt above the prior weeks’ highs and established a new battleground for the weeks to come.

I’ve drawn a green box around the prior weeks’ congestion/consolidation. The NASDAQ took five weeks to catch its breath after it had rallied, hard, off of February’s lows.

In the above chart, the red line represents the critical level of resistance that the NASDAQ had to overcome to be taken seriously. It overcame it, thus turning that resistance level into a support level. Next, the NASDAQ spent five weeks consolidating above that red line, testing and retesting it for support.

At length, having satisfied market participants that the support would hold, the NASDAQ found fresh legs to carry it upward. It moved swiftly through the next layer of resistance (the blue line) and is now cutting its teeth in the void, above.

I’ve drawn a second, upper blue line at what I perceive to be the next test for our perky friend, the NASDAQ Composite. It will be interesting to see how quickly the NASDAQ addresses this line. It is not out of the realm of possibility that the move may be swift, given the small amount of hesitation that took place in this range on the way down.

Below is another view of the NASDAQ Composite’s performance this week. This chart is built on daily candlestick bars.

The blue lines remain in the same position as drawn on the top, weekly chart. So does the heavy, green uptrend line. However, the thin, red line is misplaced on this chart (my bad!) It should be drawn higher, at the base of the blue box that encases the five week consolidation (my apologies).

This being a daily chart, the single bar on the weekly chart (top chart) is now reflected with each contributing day shown as its own bar.

The green box highlights this week’s activity, as the NASDAQ leapt up above resistance on Monday, then battled the rest of the week to convince market participants that the move was sustainable and legitimate.

The multi-colored boxes beneath the lower, blue line represent the five weeks consolidation that took place prior to this week’s move. The retesting of the lower range is more clear on this daily view. Note how prices fell to the lower support band on two occasions during that five week consolidation.

Also of note on this daily chart, is how this week’s move has, again, tagged the heavy, green uptrend line.

Since I wrote in last week’s column how the S&P-500 Weekly Index was range-bound, I thought we’d revisit that index to see how it faired this week.

The S&P-500 index, like its cousin the NASDAQ, is looking at higher ground. However, being more timid, the S&P-500 didn’t leap to higher ground. Instead, it has taken a cautious sniff of air above that resistance level, but did not make any commitment.

Does the overall market queue off the NASDAQ? I guess that’s the question of the week. The DOW-30 seemed more anxious to make the move, but still did not match the concise move of the NASDAQ.

In the coming week, if the NASDAQ can hold its ground, we may see the other market indexes loose their inhibitions and move to join their cousin.

Either way, the market will surely provide many opportunities during the coming week.

Trade safe!

Please Note: This article is an expression of my opinion. It’s meant to inform your thinking, not lead it. To be a mature investor/trader is to become educated – to think for one’s self. You are responsible to decide the best place for your money.

Always remember, any decision you make will put your money at risk – given that market conditions do change and the value of your investment will rise and fall based on those changing conditions.

Information presented herein was current at time of publication; however, change is inevitable. Data presented may have been overtaken by market events. Should you desire to act on information presented herein, always verify it against current market conditions.

I accept no responsibility for any loss or damage resulting directly or indirectly from the use of content in this article.

Disclosure: At the time of publication, I do not hold any positions in stocks mentioned in this article. I do reserve the right, however, to take a position at some future time.