Sunday, February 12, 2012

02-12-2012 outlook and comments

So far this year there has not been a lot to comment on when it comes to "swing trading" as the market powered upward. Of course, no market goes in one direction forever.  It appears that at this time the market is at or approaching a top.  Looking at the longer of the cycles I follow (the 20 week Wall Cycle) it appears it should top within about two weeks.

If we look at the Wall cycles in sets of 3 (since the 2009 bottom) we see that cycles 1, 4, 7 start an uptrend after substantial pullbacks.  Cycles 2, 5, 8 continue the upside that began with cycles 1, 4, 7  after a minimal pullback.  Cycles 3, 6, 9 (??) see  a substantial pullback. 

We are now in cycle 8 which is pushing upward and is expected to top  around Feb 23.  After which a pullback is expected over about 8-10 weeks into May.  If past patterns hold this pullback will be 5-10% or so (not a major correction).

Here is my interpretation of the Wall cycles:

So it is about time to take some money off the table if you are long and/or hedge long positions if you decide to hold them.

Shorter term it appears we have a 22TD cycle that topped this week and will be down the next weeks moving counter to the Wall cycle.  This should limit the upside from the Wall Cycle as we get a topping formation.  I do not expect much (if any) upside from here.  Here is my interpretation of this 22TD cycle:

My conclusion is: 1) take some money off the table (trim your longs?),  2) tighten your stops on positions you choose to continue to hold, 3) do some hedging (IE sell out of the money calls?).  GL traders

Update:  although not in exact agreement my analysis seems to align closely to Cliff Droke's latest comments: 

"The nearest weekly Kress cycle of intermediate-term consequence is scheduled to peak next Friday, Feb. 17 (plus or minus). A second interim weekly cycle will peak around March 9. There is a greater than average chance that one of these two cycles could put a significant peak on the market, though we won't know for sure which of the two dates is most likely to be the interim high until closer to the cycle peaks."

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