The range has been tight this week even with the new record high. We’ve even had a new minor bottom form at 7050.20. My biggest concern, however, is that the index is still close enough to close lower for the week and that could light up charts all over the world if it did.
Swing chart analysis tells us that the trend is up. A trade through 7138.64 will signal a resumption of the uptrend, while a failure at 7050.20 changes the minor trend to down and with that will go all the current upside momentum, in my opinion.
Now simply changing the minor trend to down doesn’t mean a major top has formed, but it can be a signal that the market is overpriced at current levels. That’s a perfectly logical assessment of what can happen.
If the minor trend changes to down then look for losses to possibly extend into the former main top at 7002.28. A trade down to this level will mean all the gains from the new high breakout move have been erased. And this is where it gets dicey for momentum traders. Breaking 7002.28 will mean the top formation has taken on the appearance of a bull trap. If panic selling ensues then look for the selling to drive the market back to the minor retracement zone at 6964.33 to 6923.19.
It’s easy to think, bull market, new high, set it and forget it. But what I’m seeing is a situation where you have to start thinking of protecting your open profit. So watch the reaction to last week’s close at 7126.05 especially on Friday and to the minor swing bottom at 7050.20. These two levels could set in motion the start of a minor correction back to at least 6964.13 to 6923.19.
Buyers Stepped Back After the Record
A record high Wednesday and profit taking Thursday. That’s the whole story in the first hour. The S&P 500 slipped 0.1%, the Nasdaq fell 0.3% and the Dow Jones Industrial Average shed over 200 points. Nobody should be surprised by that. You don’t hit a fresh all-time high and expect the next session to open with fresh buying. The question isn’t why it’s down. It’s whether the dip finds takers before the close.
