No change in the longer term view in the $ index as the market is chopping near the middle of its range since the March 2008 low at 70.70. Continue to view the market as forming a large pennant/triangle over that time (tighter and tighter ranges), and with eventual declines toward the base (currently at 75.60/85) still favored. Nearer term however, there remains scope for more ranging in the upmove from the Aug 6th low at 80.10, before resuming the bigger picture decline (see "ideal" scenario in red on weekly chart below). Switched the longer term bias to neutral on June 14th at 86.30 from bullish (put in place on Dec 5th at 75.95). For now and given the risk of further near term ranging/upside, would maintain that neutral longer term bias but with the expectation of switching to the bearish side ahead.
Nearer term
as mentioned above, trade from the Aug 6th low is seen as a correction, and
with an eventual resumption of the longer term declines to new lows after. However, this consolidation has lasted only a
few weeks but is correcting and down move that lasted 2 months (from the June
high at 88.70), and may not be long enough "time-wise". Note too that the daily macd remains in buy
mode (see bottom of daily chart/2nd chart below), and suggests that at least
another few weeks of correcting may be ahead. But a couple of near term warnings when
thinking about a position - the magnitude of any further near term upside remains
a question due to the gains over the last few weeks being seen as a
"correction" (versus the start of a more major, new upleg), the
market is nearing good resistance at 84.30/40 (50% retracement from the June
high at 88.70) and this correction could always be a more extended period of
relatively tight ranging (versus a much deeper bounce). What this all means is that the potential/
confidence in getting long here is not extremely high. But this does not mean that a position should
not be taken as long as the risk/reward still makes sense. In this case, would buy here (currently at
83.05), but using an aggressive stop on a close below the bullish trendline
from the Aug low (currently at 82.55/65), to still give a good overall/risk
reward (limited risk). Remember as I
have mentioned numerous times in the past, risk/reward is key and in this case,
despite that the fact that the confidence/potential reward is not seen as
extremely high, the aggressive stop still makes for a good overall
risk/reward.
