I always try to make an effort to focus on “the current trend” and to avoid focusing on things that “maybe might prove to be ominous signs in retrospect” or to imply that a certain tidbit of information is predictive when in reality it is mostly just anecdotal. Still, human nature is – unfortunately, in this case – a powerful force. Which reminds me to invoke:
Jay’s Trading Maxim #17: Human nature is a detriment to trading and investment success, and should be avoided as much as, well, humanly possible.
The bottom line is that despite my very own warnings and admonitions, sometimes that pesky human nature gets the best of me.
What I'M Watching
OK, rather than me telling you what I think, please simply peruse the charts in Figures 1, 2 and 3 and see if anything jumps out at you.
Figure 1: Courtesy AIQ TradingExpert
Figure 2: Courtesy AIQ TradingExpert
Figure 3: Courtesy AIQ TradingExpert
Perhaps you noticed the same thing I did, i.e., a whole bunch of single country ETF’s hitting new highs or testing old resistance and getting rejected. In a number of cases, after appearing to break out to new highs for a period of weeks or month only to fall back below the “line in the sand.”
It’s sort of like the World Cup of Failed Breakouts.
Summary
Now here’s the thing. I have displayed a bunch of charts that anecdotally seem to imply something bearish. To spell it out, failed breakouts are often – though definitely not always – followed by something much worse.
So the line of reasoning goes like this, “If the stock market in umpteen countries is failing to advance then this must be a bad thing.”
But the reality is that all these markets have to do is rally and this whole sort of made up area of concern goes away.
Still, until that actually happens I think I will:
a) Enjoy the rally here in the U.S.
b) Remain vigilant
It seems like a reasonable plan.