Inflection Point or Half-Way Mark?
- Posted by DynamicHedge
- on January 28th, 2013
The $SPY daily chart above has vertical lines to indicate times when the market has traded above an 8-period moving average for 16 consecutive days. These are times when the market was on a long run to the upside and felt terribly stretched, very similar to conditions we’re currently experiencing.
This condition has happened five times since mid-2010. In some cases, these conditions coincide with price exhaustion and a short-term top (annotated in red). Others times, it was merely a speed bump of consolidation on the way to higher prices (annotated in green).
The market does feel risky here, but we’re certainly not in uncharted territory, and the outcome is certainly not black and white. What do you think: short-term pullback or consolidation and higher prices?
Disclaimer: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please click here for a full disclaimer.
DynamicHedge is an equities, futures and derivatives trader based on the West Coast. He runs a long/short opportunistic relative-value strategy within a proprietary trading group. More
- Market Cap Arbitrage: SPY vs IWM
- How to Deal with High Frequency Nowcast Economic Data
- An Almost Impossible VXX Rally
- 4 Misconceptions about Dow Theory
- Gap Personality: When to Chase and When to Hold Off
- Sophisticated versus Effective
- Three Month Consolidation Break
- Efficient Markets Believe In Trends
- Marketview: Lost Steam
- Undiscountable Trends: Live Event Interaction