We are Only Missing a Rally

We are almost reaching the end of this abbreviated trading week and one important piece of the First Higher Low pattern completed today. If you want a full detailed video training about this pattern, the place where I learned about it was at spiketrade.com from Kerry Lovvorn.

Today we got a false breakout, the pattern can still fail (red dotted arrow), and we are missing the most important part, a rally (green dotted arrow). Eventually if this is going to become an uptrend or a new Bull Market the rally has to exceed the previous high at 4,637 (horizontal solid black line). If the Bulls are really strong the demand should reflect that power, getting only to the same previous level isn't real strength.

I have marked the same pattern in the S&P 400 (mid-cap companies), I don't like the false breakout in the chart below, the low is very shallow, but that's what we got.

The small-cap companies are still showing weakness, barely just trying to get back above the support at 1,292. If you are focusing on these companies, also check how the specific Industry of your stocks is performing, a weak S&P 600 and a weak Industry chart isn't going to give great probabilities of success trading on the long side.

Another important indicator to look for, other than price and volume are the New Highs and New Lows (NH-NL), especially on the Monthly columns (G, H, I). The selling pressure decreased a little bit the last couple of days, in order for the Market to rally the numbers have to turn more bullish.

One day of stock gains doesn't mean things are now bullish, let's see how the week closes. There are important catalysts that will continue to affect the Markets. The inflation, the virus, the Ukraine war, the earnings season, tensions with China, none of them is over yet. If the Markets rally, that's great, if not it's better to have a strict risk management in place so that there is limited damage to your account.