Many in the Financial Media are sounding the "All Alerts" siren for an impending implosion in the markets. Are they correct? Can't really say. I do know that many have been calling for this for awhile while it continually trends higher..although in fairness, it doesn't really feel that way. There's a classic expression in the markets that goes it's climbing a "Wall of Worry". That being said, our stance on all of this is to keep our heads down, find advantageous risk/reward opportunities, maintain an acute sensitivity to shifts in market momentum but basically buy on dips and sell into strength..more to follow.
As the above Weekly Dow chart clearly shows, we wouldn't be surprised to see the stock market really take off. We've more or less been in a sideways pattern since the end of March/April; which when you account for this coiled behavior, projects a potential target of 20,000!!!
So, since the last market commentary, we saw a few bear trap candles(red candles that are bearish) only to breakout to the upside on Wednesday, to only make a new high on Thursday's open, to only pullback into the channel by the close.
Here at the Stealthy Trader we always try to get the most confirmation w/o missing the trade. The fact that the market temporarily pulled back(It is only an hourly chart after all) doesn't mean it's not going to go back up. But in our philosophy, we will wait to take trades until this immediate pullback plays out. But let's be clear that the Support Level on the Dow is around 15,542 and Resistance Level 15,651.
So, on the Daily chart above, we can see that the Dow is once again deciding what it wants to do at this very key resistance level. As you can see, the last 3 times it disappointed(for the bulls, that is) and headed back down to test the lower boundary of this multi-month channel. We aren't as concerned with the immediate action in the Index and as the next chart will show, are more preoccupied with the shorter time frames.
As the hourly chart above clearly shows, the Index pulled back a little from all time highs(15721) that were set on Wednesday AM and then pulled back a little and spent the last two days of the week in a congestion pattern. That being said, this has been the pattern du jour during most of the run-up. We are confident that the market is on the verge of an explosive up-side breakout as it's been coiling like this for the past 7 months!
That being said, we at The Stealthy Trader(ST) very much believe in aligning our strategies with the overall direction of the market. So, in other words, our ideal scenario is to have a "bullpen" of go to stocks handy that we follow in "Stealth Mode". This includes knowing how they've re-acted to recent moves in the Index in combination with the overall buying momentum for each stock. One of the more frustrating things that can happen is having your timing all synched up to only experience a dud stock that just sits there while both the market & other bullpen stocks you "passed on" explode!
So, let me conclude this post by introducing a key tenant of the ST methodology..We're more concerned about the present momentum in our "bullpen" of stocks than the immediate behavior of the market index(Dow/S&P/Nasdaq)..both are important, but not of the same magnitude.
For the upcoming week, our ideal scenario would be to perhaps experience some weakness in the Index earlier in the week while noticing some subtle buying pressure in a few of our bullpen stocks. We are very prepared to pull the trigger on some buys(we will post) should our belief that the market is due for it's explosive breakout(sooner rather than later) come to fruition.
Have a great start to the trading week and make sure to sign up for our mailing list as no doubt we'll be adding both content and product in the coming weeks and months.
So, in other words, enjoy it all while it's still free :-)
The Stealthy Trader
An experienced trader with over 15+ years of markets experience utilizing proprietary filters and analysis tools to uncover low risk trading opportunities.