The stock indexes have been on a relentless run over the past 18 days. The daily chart to the left of the S&P etf shows an almost uninterrupted succession of up candles. Nearly all the candles are clear, in this case meaning the close was higher than the open. Even on the few days that had closes lower than the previous close, the bull still won the day as the close was nearer to the high of the day, creating bullish candles. Often the buying surge would occur in the final minutes of the day. On the few black candles, or days where the market closed lower than the open, the net change for the day was still positive. Many days gave all signs that a retracement back down would begin, but nearly every attempt at a sell-off attracted buyers.
This is very odd behavior. Markets usually have more two way action, displaying an impulse and then a test. This back and forth action is much like the market breathing in and out, with the cycles forming the trend. The current impulse does not display normal price action. On a longer term basis the market still has a lot of ground to make up, and the breakout of the weekly head and shoulders referred to in the last post, seems to be successful. But on a short term basis it seems something has to give soon. Many have been calling for a pullback, but that pullback seems elusive. I would think the longer the indexes move up without digesting the gains, the more likely an unhappy ending could occur. I see few signs so far of the much anticipated correction. Volume is starting to drop off as the market marches higher. Bulls will just say this is typical summer volume behavior. Trends and momentum are all obviously to the upside. A correction could occur without a timely technical setup as bulls run for the exits all at the same time. Still there would likely be traders who would welcome the pullback to jump on board, so initial pullbacks could be met with more buying. But at least there would then be some reference points to work with. I still view this rally as a counter-trend move within the larger context of a primary bear market.
Notice the chart this time is from thinkorswim. I’ve been using that program for option spreads and like the charts.
I came across an interesting article on the subject of inflation vs deflation. It is a very basic explanation. Sort of a primer on the subject. It is well worth a read. CLICK HERE to link to the article.