Time For A Breakout?

On Wednesday, the Nasdaq open flat and worked its
way higher. Then, late in the day, it drifted ahead of the Fed
announcement. After the announcement, it sold off but managed to turn
around to close well.

Wednesday’s action puts the index near the 2100
resistance level and fairly close to the 50-day moving average. At the
risk of being redundant, if we can get above these levels and
stabilize, then I’d be willing to reevaluate the topping formation in
place.

 

The S&P drifted
lower and is now fairly close to the bottom of its recent range.
Again, longer-term it still looks like a topping formation here
too. Shorter-term it looks like a trading
range between 1200 and 1240. Like the Nasdaq, if it can get above its
recent range/the 50-day and stabilize then it too would look much
better.

 

 

The low volatility in the indices suggests that
we are due for a large move soon. Or, is it just summer? 

So what do we do? I really expected to have a
different spin on the markets after the Fed busted us out of the range
today. However, as you know, that didn’t happen. Therefore, I suppose
I’ll stick with my recent cautious tone. There is a CVR I buy signal,
but I’m only going to score it as a minor positive at best.
Why? Because it is occurring with the VIX at a relatively low
level and also might just be volatility dropping because the Fed news
is out of the way. 

Looking to potential setups, Pixar (PIXR),
on the  Pullbacks
Off Highs List, gapped lower on the open but reversed to close
well. This action suggests its strong uptrend remains intact.

On the short side,
Digital Lightwave (DIGL),
mentioned recently, still looks like it has the potential to
resume its meltdown out of an inverted cup and handle. 

Inverted Cup And Handle Or Head And Shoulders?

I was recently asked why I’m now showing the
S&P as an inverted cup and handle and no longer showing it as a
head and shoulders top. It’s still a head and shoulders top (see the
SPX chart at the top of this column), it’s just that it already broke
down from the neck line. As you may have noticed, many
“cups” are often made up of head and shoulders and other
market topping/bottoming formations. The bottom line is that it
doesn’t matter what you call a pattern as long as you recognize it as
topping (or bottoming) formation.

Best of luck with
your trading on Thursday!

Dave Landry

sentivetradingco@prodigy.net

P.S. Reminder: Protective stops on
every trade!

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