Patience Required

  • Posted by on October 12th, 2016 at 3:50 am

The S&P 500 ($SPX) is the U.S. equity index that I use to watch and gauge strength or weakness in the US stock markets. If we concentrate on just this year’s price action, the $SPX has put in a very impressive rally off the February lows. It is impressive for 2 reasons: 1) The lows were actually at a healthy Fibonacci retracement level of the monster rally in U.S. equities that occurred between 2013-2015; and 2) The rally has had 2 healthy corrections this year that have been largely supportive of the move to new highs at the 123% Fibonacci extension target of the 2013-2015 rally after the market fell in February.

But there has been something glaringly wrong with this rally even as it reached new highs. The momentum in this rally has not been supportive. As price moved higher, buying momentum was waning. A rally needs more, not less, buying momentum if it is to continue even higher. That is not what has been happening this year.

S&P 500 daily chart

That lack of buying strength manifested finally when the market moved lower last month in September. After this decline, the market then moved in a choppy, sideways grind for 3 weeks. There just hasn’t been a move to take advantage of in either direction with indecision from both buyers and sellers. These failed highs signal a move below the 2120-level. It took almost a month but this anticipated move lower finally got started yesterday when the $SPX broke support around the 2140-level.

S&P 500 4 hour chart

So, as anyone can observe, it has been a tough market to buy since making the new, all-time highs in August. If the market continues to move lower, the news media will start to get louder with pessimism and bad news. Be forewarned and understand that that will be the precise time to shut off the TV and revisit your investment plan. Because even after the 2008 financial crisis, there was a buying opportunity. And what a buy it was. Don’t get scared of the next financial crash. Get ready.



  • I Survived the Flash Crash
    Posted by on October 6th, 2016 at 5:15 pm

    The GBP just crashed in epic proportions. The official number is -5% in 2 minutes and 3 seconds. It is already being called a flash crash […]

  • The Noisy Twitter Bird
    Posted by on October 6th, 2016 at 1:42 pm

    Twitter has been making a lot of noise in the news since last week. The media caught wind that Twitter was entertaining buyout offers. This is not […]

  • The Year of the Dragon
    Posted by on September 27th, 2016 at 5:50 am

    Sterling markets remain much unchanged from Volume 77, thus confirming that the resumption of the long-term downtrend that is the Great British pound has taken place. […]

  • Is She Baaaa-ack?
    Posted by on September 14th, 2016 at 4:26 am

    The new trading week is packed with market-moving economic releases out of the UK. Inflation, the UK jobs report and retail sales are all released […]

  • Australian Dollar On Fleek
    Posted by on September 7th, 2016 at 3:50 am

    The Australian dollar continues to rip higher with little regard for the Reserve Bank of Australia dovish sentiment. Though the RBA has cut interest rates […]

  • Euro Finally Breaks Under Weight of ECB
    Posted by on September 2nd, 2016 at 12:30 am

    Despite breaking to new highs now at 0.8724, momentum is still unable to match the new highs in price with new highs on the RSI. […]

  • #TBT to #FuturesRadio
    Posted by on August 25th, 2016 at 6:40 am

    I made my debut with the famous Anthony Crudele on #FuturesRadio last month just ahead of the Junior Olympics. It was an extremely hectic time […]

  • ON AIR with Benzinga’s #PreMarket Prep Show
    Posted by on June 16th, 2016 at 4:11 am

    As a sterling trader, I feel inundated by talks of the UK’s upcoming EU referendum vote. Well all forex traders have been feeling the fatigue […]

  • USD Leaves Markets In Suspense
    Posted by on June 15th, 2016 at 7:09 am

    This is our look at cable ahead of the FOMC meeting: As price met resistance in the zone between the 1.4750 and 1.4800 levels, momentum […]