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The rally has begun but getting too excited too early can lead to damaging results. There have been so many experts out of the woodwork in the last few weeks calling the low. I don’t recall them calling the high in 2007, I do remember some of my colleagues were though. David Bowden had a saying let the market prove it’s a bottom or a top rather than us calling it a top or bottom.
One of the most useful signals I have been watching is my swing chart but not just a 1 day chart. Daily swing charts (1,2 and 3) as well as a weekly swing chart are all excellent guides in confirming how serious this low is. There have been some very nice 1 day swing chart trades in the last couple of weeks and well worth being on, that being said it’s hard to get back into the market for the longer term until we see the larger time frames confirming up trends.
A quick check on the following 4 charts shows the perspectives that different time frames can provide.
Chart 1 – 1 Day Swing Chart SPI200
click chart to enlarge
Chart 2 – 2 Day Swing Chart SPI200
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Chart 3 – 3 Day Swing Chart SPI200
click chart to enlarge
Chart 4 – 1 Week Swing Chart SPI200
click chart to enlarge
There is no consensus according to the charts but we do see the 1 day chart has flipped into being uncertain, as this is the most sensitive to change we can see this quickly move to being up or down. The 2 day swing chart is up with a bias to the upside ranges and contraction to the downside.
The 3 day swing chart trend is down but is also the slowest in some ways to respond to changes in trend so we can expect this to lag the market. Finally the weekly chart is also uncertain with a bias towards markets moving higher as the upside ranges are expanding.
So as you can see it’s not the clearest of pictures, so until the larger time frames i.e. the 3 day and weekly swing charts can be confirmed as up then I will remain a neutral to bullish standpoint. If they can all get into sync and being trending let’s say upwards then of course this will assist me in biasing my trades to the broader trends in this case up.
So I am patiently waiting for bigger picture to sync with the smaller picture before I start claiming this is the low to end all lows. For the record it has some harmony and could be a staging point for some sort of recovery but I feel in the course of the next 12-18 months we may come back to test if not break the lows we have seen in the market to date.
Aaron Lynch
Good Trading
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