Knowing that markets move in cycles and patterns and are continuously changing to keep us on our toes, I wanted to point out one little mini pattern I just noticed as I was perusing some charts, patiently waiting for my wife to get ready for the New Years Celebratory fun to begin. This noted pattern may be something or it may be nothing, but I felt it was worth pointing out to see how it plays out. I use my blog as a journal as much as a tool to share my experiences & observations with you.
It seems the Nasdaq has been moving in little mini 5 week patterns since September and when that cycle is up, it continues on in that direction or pauses for a short time before moving in the direction of the primary trend, which is up. In my experience time is just as important as price when trying to time the market.
You may be right in the direction of the market but if you’re too early in the cycle you could get burnt. Many times I’ve been too early getting short, freshly squeezed like orange juice to cover, only to watch the market go in the direction I knew it would. I italicized “I knew” because we all know, right….or at least we think we do. I’m actually becoming quite comfortable in not knowing these days.
So if we use this 5 week cycle as a blueprint and add in the fact that my market timing signal is starting to weaken significantly, a pause is very likely upon us. Now whether it turns into some time more significant I can’t say at this point and if we take out the recent highs I’m going to blame this fake-out on light volume holiday trading….So now we wait and try not to get over-positioned in the market because it really could go any way at this point.
[Click to enlarge]