Oh well, Summer Doldrums!
Updated: Jul 25, 2021
On Wednesday 16 Jun 2021 10.26pm, I emailed Clients my latest post titled 'Oh well, Summer Doldrums!':
In my 17 May 2021 writeup, I said:
'..Thus even with Friday's (14/5) SPX strong price rebound, price action still has not authoritatively reached into the upper BB (Bollinger Bands) segment. Even when it does, we also need to see that the next price swing down does not breach back into the lower BB segment.. You see, currently, I do not have a bullish pattern on the Chart that immediately tells me we are heading higher. Further, as we are now in the US 6-months negative Seasonality (May to Oct) for the year, ranging or sideways market may become a feasible feature.'.
So what is the World's most powerful stock index doing right now, one month after my writeup?
1) On 3 Jun, the S&P500 Index (SPX) swung down to meet the BB midpoint line and then immediately bounced off from there. Since it 'did not breach back into the lower BB segment', this has bullish connotations.
2) SPX then proceeds to reclaim all time highs & has now set up a new bullish green Cup & Handle Pattern.
3) An authoritative breakout of that Pattern will likely see SPX targeting 4420+/-
4) Of course, should that breakout be NOT authoritative, then a swing back to BB midpoint at 4200 is highly possible. The BB midpt line currently coincides with the blue dotted TL1 trendline as well.
5) Negative seasonality effects* is likely to come into play and make this current bullish set-up a lot more volatile & harder to trade. Oh well, Summer Doldrums!
*For the uninitiated, Negative Seasonality doesn't necessarily mean the market will crash. It just infer gains are harder to come by or there is heightened potential whipsaws in the market.
In short, while I did not see a bullish setup back on 17 May, currently a bullish Cup & Handle pattern has manifested itself & an authoritative breakout will likely see SPX targeting 4420+/-. Anything less than authoritative will likely see SPX testing back to its BB midpoint line and then more. Moreover, due to negative seasonality effects I'm concerned that this bullish set up may turn out to be more volatile than usual. Given such a backdrop, traders should reduce position sizing while longer term investors can consider to only add positions on weakness.
Live Long & Trade Well!
Thank you & regards
Thomas Ng, CMT
Principal Trading Representative 首席股票经纪