It’s hard to believe the summer is almost at a close. Nonetheless it’s easy to tell the pending wind-up, the weekend temp in “O-town” didn’t drop below 100 Deg. once. Oddly enough I’m flying my son out to Copper Mountain for X-Game Ski training at Camp Woodward this weekend – snow in the summer, go figure. Hot/Cold, Hot/Cold – not unlike 2011’s market action. The markets have been in a pseudo channel of sorts for nearly 6 months with no clear resolve. This bout has left many tossing in the towel until further clarity arises – evident via volume.
One this is for certain – which we quoted in Friday’s WIR – the longer the confusion, the greater the resolve (whichever direction). When this action continues as such we tend to step back, take a broader view and ascertain from a higher elevation. Today we focus on Weekly Action. First up is the SPX. Technically evident here is… the large Andrew’s Pitchfork (discussed last week), a potential Head & Shoulders Top, a Stochastic Divergence and declining volume.
Next up relates directly to the Dow Theory, not to be mistaken with TAM’s 100-Year Market Theory, The Dow Jones Transportation Average. This secondary index is pushing the topside of 4-year highs within an extended (2-year) channel. The top congestion of late also is littered with divergence within the Stochastic and Volume.
When looking at the longer-term it gives greater appreciation for the ‘absolute’ trend and alleviates some of the relentless noise of late. Many times stepping back is the only solution – the whole… can’t see the forest through the trees idiom. That said, on a secular basis (5 + Years) the markets technically look very toppy and reside along the top of the channel stemming back to 1999. Remember, this look does not attempt to thread the needle but rather give a longer-term technical perspective.
As always, I hope this helps.