It was a welcome relief to avoid having a tenth, yes, tenth day in a row of the market lurching higher. One day does not a trend make (or break), however, and there’s something more general I wanted to share which is on my mind, particularly as we await the pointless Fed announcement and press conference on Wednesday.
It’s what I’ll call the “zone of uncertainty“, which is the space on the y-axis spanning from Friday’s peak to the peak of the March 25th bounce. I’ve marked it on each chart below in yellow. Give these big indexes a glance………..
There are three possibilities I am considering with respect to this zone:
- We do not even penetrate into it, leaving last Friday as the peak of the counter-trend push and hammering out a clear “lower high” we can use as a reliable stop-loss level for any position. If the market gods are reading this and are feeling munificent, this is the outcome I desire.
- We push into it and approximately match the March 25th high, after which we head lower. This achieves the same thing, but with considerably more discomfort. The closer we get to that March 25th level, the riskier it gets, because of the other possibility, which is……….
- We zip right past the March 25th peak, which would mean the series of lower highs is dead, and we can basically put a gravestone next to any prospect of a meaningful drop for the foreseeable future.
My discomfort with the situation compels me to continue to Take It Easy with respect to size and positioning, and I am still at a mere 89% commitment level, as opposed to the 160%-170% level I reach when I’m going gangbusters.
I will say, however, that the failed trendline on the Dow 30 as well as the continued existence of the Liberation Day Gap gives me additional hope. I think I will wait until Thursday morning, well after the Fed, before I even consider getting really aggressive again.
