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When I look at the weekly DOW I see over-exuberance:
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The rise is only another 6% but it could be the tipping point into a potentially ‘over-bought’ market – despite many fundamental analysts telling us that shares are traditionally cheap.
Technical analysts subscribe to the view that markets need to go to extremes for profitable trades to be created – whether that be by going short or long.
Our market may head lower in the short-term:
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However, a weekly analysis indicates our market is already just about there:
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Another chart I am watching with interest is a 60-month DOW:
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I am not saying it is going to happen but I am ever conscious that when markets run like this, they have to correct.
I am concerned that some investors may be buying, as a broker would say, “for the long-term”. There’s nothing wrong with this per se, but it still makes sense to buy cautiously when markets are cheaper and not at the top of the run.
There is a lot of money trying to find a home all over the world and this has been pushing markets higher. But loose money is not smart money.
Current Elliott patterns give me every reason to believe we will see range trading for an extended period (maybe one, two or more years), albeit within a wide range.
Which is great for range traders. This is a time to skill-up – there is easy money for those who are prepared to work at it.
Enjoy the ride
Tom Scollon
Chief Analyst |