Friday, January 7, 2011

Almost there

Today's lackluster performance in the Dow cost us 26 points but still keeps us riding along the top edge of the ascending regression trend channel as you can see in the daily chart. At this rate it would take four more days of sideways action or a one day close at 11,646 to signal an end to this uptrend. Given the recent action, I think this is unlikely tomorrow. Also note that today brought us just a bit under the pivot point at 11,706. And the Dow has not traded meaningfully below its daily pivot since last November, indicating a continuing bias to the upside.

It's also unlikely, with just one day left, that the S&P will close out the week below its Monday open. That would confirm the historical "first five days" indicator. We'll find out tomorrow. As of this writing (12:30 AM EST), all three futures are up modestly leading me to keep my long hat one and the green arrow in place. There is no indication yet that this uptrend is over.

Many people have commented that we're due for a pullback based on the indicators currently at overbought levels. However, in extended trends, the indicators eventually become "broken" and lose their predictive power. For example, the RSI has been showing overbought since December 3rd, and yet December was a terrific month. I think the RTC will be a more accurate predictor of the trend change when it comes.

No trades today.

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