The Price Action Is Warning Us
- Posted by JC Parets
- on February 6th, 2013
Here’s something that worries me about the Stock Market today. The swings are getting bigger, not smaller. So volatility is expanding. The S&P500, therefore, is putting in somewhat of a broadening formation. Definitely not a check mark for the bulls.
And if it was just that, then maybe it could be brushed off. But it’s where it’s happening that gives it validity. As you can see in the daily bar chart below, we’re at the upper end of this multi-month trend channel:
So I don’t want to be Mr. Uber-Bear up here. But I think it’s worth noting that stocks are definitely vulnerable. And not just because we’ve gone up so much, but because there is actually price evidence.
Take a look at a longer-term chart showing the consistency of the sell-offs when we approach this upper trendline:
All I’m saying is that it’s prudent to be extra careful. We’re no longer giving this monster uptrend the benefit of the doubt. To me it’s guilty until proven innocent. At least in the short-term.
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J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) in 2008 and now actively manages money incorporating Technical Analysis and Behavioral Finance into his practice More
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