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Not quite but maybe heading that way. But yet investors keep buying – for the long term they say.
Let’s look at a chart:
click to enlarge
This is a simple Bollinger Band chart with Elliott obscurely in the background. Elliott is not a feature in this chart as it is showing a sideways ABC pattern. So Bollinger is our focus.
The DOW and the bands are heading higher and that could continue for a while yet. I had expected a retreat into a wave four but all news is good news at the moment and so markets march on with gay abandon for the time being.
It will reach a point where it has run just too hot and then short term players will look for a reason to take profits and potentially all news could become bad news. But I sense that could be some time off.
But it is worth noting how the DOW has tracked the upper band for over a month now. But we know that could continue for a while and it did track in a similar fashion for all of March and April this year.
All looks pretty chummy right now. I am not a party pooper and I am not bearish but I just don’t want to join this party this time. I can wait.
And I notice a few others are waiting. Take a look at volume as depicted by On Balance Volume:
Let’s look at a chart:
click to enlarge
This is not a major negative divergence but it just says caution – buyers are starting to dry up!
There will be another party before Christmas! Yes this Christmas.
Enjoy the ride
Tom Scollon
Chief Analyst |