Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

In the Din of the Market, Price Charts and Simple Technical Tools Are the Best Guides


If Twitter streams were able to produce a market weather forecast, it would be something along the lines of "Positively Sunny With a Chance of Torrential Downpour." Meaningless.

Renko Charts – Trend is Up

We can cut through the fog and noise with some simple S&P 500 Index (INDEXSP:.INX) Renko-style charts, which focus solely on price. (Renko charts are similar to point and figure charts where new boxes are drawn only after price crosses certain thresholds regardless of the time elapsed -- one box to continue, two to reverse.) Add in a triple moving average system to help quantify the trends and then mark them up with a few hand-drawn trend lines to complete the picture. Here are charts covering the long and medium timeframes both in solid uptrends.

It isn't until we zoom all the way down to 30 minute or shorter Renko charts that we get a sense of the sideways market that potentially reflects the recent selling pressure and divergences described above. Watch for extension of the trend higher if price runs over highs at 1474 for an ultimate test of 1500. On the other hand, it would be worrisome if the 1450 level is given back so quickly after the recent consolidation and breakout. Double top + divergence = double trouble for the short term. However, there is interesting support stacked up at the 1425-1430 level that might hold and prevent a drop all the way back to 1375. The lesson from the last couple years is that we shouldn't underestimate the liquidity funds waiting on the sidelines that can catch a dip and convert a correcting market into yet another up leg in no time flat.

So once again, price charts and simple technical tools can guide us in spite of the din of market opinions. Your current trading plan should reflect the state of the market in medium and long term uptrends with shorter term consolidation action. Stay disciplined, do your own unbiased evaluations, and execute your strategies. Try not to get distracted by the divergent impassioned views expressed around us.

Twitter: @BBTompkins and @seeitmarket

Facebook: See It Market

Editor's note: This article originally appeared on investing and economics site, See It Market.
No positions in stocks mentioned.
Featured Videos