As the market hits a new high, should you buy, sell or hold? To answer this question, let us together analyze some of the important factors.
The chart
The annotated chart of S&P 500 ETF SPY, shows a breakout through the resistance to a new high.
Please click here to see the annotated chart of S&P 500.
In a simple world, here would be the key observations on the chart.
- Based on traditional technical analysis, a measured move up will extend the new range by the same amount as the prior range.
- The target of the measured move is 2448 as shown on the chart; this is about a 15% projected up-move.
- Since the prior range held for a long time and there were multiple previous attempts to break through the resistance, according to traditional technical analysis, there should be high confidence in this breakout.
The flip side of the foregoing positives is that the traditional technical analysis no longer works as well as it used to. False breakouts are more common. The reason is that traditional technical analysis has become widely and easily available leading to the masses using it, and sophisticated market participants trying to game it.
In total, I believe a high degree of confidence cannot be placed on the chart at this time.
Earnings trough
In the long run, earnings growth is the single biggest determinate of a market rise. Earnings have been declining for several quarters….Read more at MarketWatch
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