The markets continue higher to test overhead resistance. The DOW is currently up about 130 points while the S&P approaches the 920 level as you can see in this 20 day, 20 minute chart below:
The stochastic remains overbought which for me is problematic if we do manage to break above 918.50 which is the height of the last two peaks. It’s also a significant resistance area going further back in time. And, it’s also now coincidental with that blue downtrend line and the upper Bollinger band. Thus, if we break above 920, I am personally NOT going to chase it even though I think higher prices are in the cards for a while here. I think the likelihood of a throw-over then pullback is very high, but I’m also cognizant of the fact that rallies can continue in short term overbought conditions.
Still, it’s one of my rules to NOT enter trades in the current direction when the oscillators are at their extremes. If anything a short term short play from 920 might be a good play, but since this is most likely wave ‘c’ up, playing short here doesn’t sound that great to me either. Thus, I’m going to practice patience and wait for an entry I like.
The VIX is down to the 37 level, about a 5.3% move, and the long bond market looks like it wants to fill that gap, TLT is in the 118 to 119 range – not a large move today, but not reversing Wednesday’s large move either.