The miniature head-and-shoulders pattern beneath major resistance (the red horizontal) completed today. The topping pattern is massive, yet the battle is unchanged: it’s the Fed versus Truth. I can’t think of any plainer way to express the war that’s being waged in the equity markets each day. Here is the Dow Jones Composite with the relevant markups:
Looking closer at the aforementioned mini H&S pattern, you can see how the neckline has been pierced. Regretfully, and annoyingly, there was fight-back persistent from 7:00 a.m. PST right to the closing bell. Thus, we remain range-bound. We need to close beneath this pattern for it to matter.
The same pattern is expressed with the Dow Jones Industrials, the best-known component of the large Dow 65.
As for the Nasdaq 100, the critically-important price gap has held fast. We got terrifyingly close to it on Monday, but so far, it has remained intact.
I would also point out the Fibonaccis on the S&P 500 have done a yeoman’s job holding back prices at these counter-trend rally levels.
For a much longer-term picture, here is the Major Market Index. The long-term trendline is quite plainly broken, and this entire year has been a steady progression of lower and lower horizontal resistance levels.
Psychologically, this remains one devil of a market to trade. There is a reason my “TK Shorts” has 48 symbols but my “Bear Pen” has 100. There are many fantastic patterns, but it’s very hard to stay bold for more than a day or two. Half an hour into today’s trading, my profits were equal to an entire day’s profits on either Tuesday or Wednesday. Those were laid waste by the close, since apparently two days of red is about all they’re going to permit.
But here’s the thing: remember how often I decried the “money left on the table” during the Feb. 20-March 23 selloff? Huge sums were abandoned based on nothing but fear of the Fed. So what is one to do? Be steadfast in the face of such baseless buying? (nearly 1,000 Dow points today alone). Or take profits – any profits – immediately and without hesitation the moment they appear?
I don’t have an answer. This is one hell of a challenging environment for anyone who trades past a timespan of three seconds. I have – yet again – dialled back to relatively light at just over 100% committed. What I wouldn’t give for even one solid week of a downtrend, as opposed to this eternal tug-of-war.