Just the Facts Ma'am ...

One of the benefits of writing this blog is that I am learning that I won’t make progress by trying to forecast or anticipate the market’s path. This may be intuitively obvious but is a hard lesson to personalize. I have to continue to become more objectively-oriented and make decisions based on factual evidence. Here are the facts:

1. The cash S&P500 is in a bear market. This is shown, for example, by prices being below support and resistance lines.
2. Prices are trending downwards. This is shown by the current ADX value being at 36.
3. The market is severely oversold as indicated by the RSI being less than 32 for six or more consecutive trading sessions.
4. The monthly chart is on a technical “sell” signal.
5. The weekly chart is on a technical “sell” signal.
6. The daily chart is on a technical “sell” signal.

All I can conclude based on these facts is that a bearish view is warranted. But, it is also the time to look for a long position. However, I will implement one of Tom DeMark’s ideas here and wait for the oversold condition to “recycle” before taking action. No trading action will be taken Monday.

In a trending market we also want to watch for “… significant interaction between lines made by +DI(14) and –DI(14) and the ADX when plotted on a bar chart” (Page 47 of New Concepts in Technical Trading Systems by J. Welles Wilder Jr.). Mr. Wilder states “The turning point often occurs concurrent with the first down turn of the ADX line after the ADX has crossed above both the DI(14) lines.” On today’s chart the ADX line is in black, +DI in green and –DI in red. The ADX line has now gone above both DI lines. Let’s see when it turns down.