Hi Everyone
If you were long the indices (and TRADING WHAT YOU SEE!) you’d have been well rewarded as the Dow, S&P and Nasdaq followed through with their respect breakouts, with their respective OVIs all positive now as well.
Now, there are times where I have a strong opinion as to what’s going on and about to happen, and there are times where it’s more challenging to be so clear. When the planets line up, the OVI is the key factor as you’ve seen during key moments in the market.
We’re currently enjoying a retracement from the big drop we sustained from 26 April to 1 July. We have retraced pretty much 50% of that down move, both in terms of price and time on the S&P and the Nasdaq, and we’re not far from a 61.8% retracement on the Dow.
The OVI is not spectacularly convincing for the Nasdaq. It’s made a sharp jump up yesterday with the S&P, and it’s positive with the Dow, which tends to have a bullish skew anyway.
Now, when the market turns (if I’m right) is anyone’s guess, but when it’s getting close, the OVI and the charts will make it abundantly clear, just as they have done with every other major move. So, if you’re long right now, that’s fine. Just remember to take your profits in the way you’ve been taught, and use the trendline to trail the move in your favour.
If you’re flat neutral right now, remember you can trade what you see in terms of flags and breakouts.
Now, for a couple of charts that are interesting, GS and GLD.
GS is forming a very constructive cup and handle pattern, literally days after earnings, the OVI is positive and it looks nicely poised. If the markets continue rising, they will surely take GS with them.
GLD is forming a Bear Flag, which in itself part of a larger head and shoulders. Long term I expect Gold to climb, but short term down as it’s currently moving inversely to the market. That’s in line with my expectation that the stock markets will ultimately fall – they’re bound to happen at the same time by the looks of things. GLD’s OVI is neutral after many months in the blue while Gold was rising. The breakout area to the downside is easy to see with the red dotted line.
All the best
Guy
To learn more and have access to the OVI visit my Private Traders Club area.
