There is actually one sign that is invisible on these charts and that is the 5 wave structure that is now in place (originating from the previous consolidation at the 425 area). I am not including the wave counts on this chart to avoid clutter, BUT when 5 impulse waves are in place, what often follows is a corrective move. This doesn't mean it WILL happen, because 5th waves can extend dramatically as we have seen in these relentlessly strong markets, which is something to be aware of especially since price is now hesitating around the 814 target which is an extension measured from the weekly time frame (I wrote about this in a previous report).
The key to timing a reversal is waiting for a structure such as a lower high, a failed high or on a large time frame. This can take hours or days to unfold and often begins with a reversal candle such as a formation or . As long as these formations are not appearing, this market is more likely to continue higher.
Since I never had intentions to short this market, the best I can do is wait for a relevant to measure risk from for a swing trade long. If you are an investor, then this short term analysis is of little value and must keep the two mindsets separate. The level I am waiting for is the 684 area which is the .382 of the current structure which can offer an attractive long IF the market retests and validates. If the market happens to break lower (it can happen), the 573 to 500 zone is the next area to watch which is the .618 of the current structure. These are the prices that offer attractive reward/risk for a short term swing trade.
Since these markets are extremely reluctant to pull back (maybe after the holidays), it is now within reason to see price reach for the 1K level which is an important psychological resistance (just like 20K for BTC ). There is a 1.0 extension at 972 and is projected from the 610 low. This offers an estimate of where price can experience resistance and possibly reverse especially since it is so close to the 1K level.
In summary, when it comes to short term trading, it is less about fundamentals and more about evaluating changes in price action. Not knowing how to separate these mindsets seems to be a serious problem that will give the skilled traders the advantage over the lottery ticket holders who have no plan, no process or way to evaluate market information that facilitates effective decision making. Vertical markets attract these participants in droves and once these markets cool off (note: all markets do) there will be plenty of opportunity for short term traders that have a well defined decision making process (also known as a plan). A plan does not have to be complex, but it should be based on scenarios that are derived from fundamental or technical measures at least. What many do not realize is the market is momentarily rewarding gambling. Buy at any price and win big, and will continue until something comes out of nowhere and pulls the rug out. Be prepared, take some money off the table when you can, and appreciate what the market offers as a gift that can be taken away at any moment.
Comments and questions welcome.
Today at around 11:30 AM E.S.T. I will be appearing on NASDAQ with Jill Malandrino live. Check it out here: https://twitter.com/Nasdaq