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Market Comments for July 21, 2014

 

Friday the market gapped up and held strong all day which led to a complete reversal of Thursday’s red bar. We noted that the pattern the bulls have maintained is to very quickly ignore red bars and that if that were not to happen, we could see a more extended pullback. The bulls followed through as they have in past and the reversal of the red bar indicates that prices will continue to see the strong tight stage II uptrend that has been in place for a long time. While the uptrend has been in place in general for a very long time, the specifically very tight power trend has been in place since the middle of May.

Back in the beginning of May we specifically stated that it would be likely we would see the market continue to move higher in a relentless fashion with narrow bars. Until this fails to continue, we will not question the existing technical pattern. However, something to keep an eye on will be the overall extension on the weekly chart. We are nearing the technical level where in the past prices have seen selling come in, and while that is never a precise area, any accelerated run over the next couple of weeks will either lead to a “blow off top”, or will begin a weekly pullback.