My little experiment at trying to pick another top in the market did not work. I dumped FAZ and will now stay on the sidelines and look for long opportunities in stocks and/or ETFs again, but very selectively of course.
I said in my previous post that we really needed to see the market do some real damage to close this week out to keep a nasty bear trend going into next week. But it did not happen at least 20 minutes before the close today and now it is looking like the complete opposite will happen. A continuation run in the markets that may even accelerate into new year time frame and beyond.
We are now piercing on the SP500 ABOVE the 50% fibonacci retracement level of this entire bear market instead of breaking down and failing below it. In addition the WEEKLY MACD sell signal I had mentioned some time ago has turned into a failed signal and the market has once again evaded a possible bear trend signal. This is the same type of thing that occurred in the 2003-2004 period were the weekly MACD kept repeatedly failing time and time again and the market just kept doing very small 2 to 4 % corrections but then just kept trending higher and higher, although it was flat for quite some time too.
We may enter a similar type scenario next year, where the market does have corrections but they are never more than 3 to 5% and the market moves still in a more modest uptrend and then sometimes long sideways trend. That type of market environment would make it very difficult for bears to get large amounts of ripe fruit so to speak and it would probably be extremely frustrating over the longer term for them.
I am still open to a real washout right after the new year, but the market really has to show that hand with conviction and by that I mean price weakness and destruction with some element of speed to it. Till now it still has not happened.
The long 1 month sideways channel we formed recently barely gave any ground back and so I have to interpret that as a continued sign of strength for now combined with the market moving above its 50% fibo level.