Saturday, February 16, 2013

Flat week

Not a very interesting trading week, SPX gained 1-2 points leaving technicals pretty much at the same level as last week. However, the action was a little bit bullish with SPX going down almost every day of the week but bulls buying every single dip and pushing the index either back in positive territory or above the day's low.

The two hours chart still gives the impression that market is overbought on short and intermediate time frames. SPX is at a safe distance, about 27 points above rising SMA 120. 

Daily and weekly charts show a positive DMI which in itself is bullish but also notice that their value is pretty high meaning that stocks are overbought. The problem with "overbought" during a rally is that stocks could stay at this level for a long time. That's why I prefer to wait for a "sell" signal than going short then get frustrated that market either goes sideways or even worse continues to advance. I know that in previous posts I mentioned an upper target (somewhere in the 1,520-1,540 area) and there is a good chance stocks won't go above this area before a decent correction but I need to remind you that guessing tops and bottoms is a bad practice. It's good to have roughly an idea how much market goes up or down but is a bad idea to act on this presumption. 

Weekly chart shows SPX above both rising SMA 50 and SMA 200, again a bullish sign overall but weekly DMI seems also at a high level.

Gold suffered a pretty bad decline this week (3%) that is not surprising keeping in mind that the dollar went up this week. 

Overall I remain neutral at this point since I expect market to move sideways for a while. It's very tempting to go short at this level but I know I need to refrain acting on guts feeling. 

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