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Back in the Spring, the S&P 500 ran from 1,050
to 1,210. It was virtually a straight line. There were no meaningful
pullbacks to buy. Even a dip of 5 points quickly reversed.
I had taken to calling that stock market rally the
“bulletproof” rally because it simply would not reverse…
Of course, the “bulletproof” rally did indeed
reverse. And part of that reversal was the infamous May 6 “flash crash”
that drove the Dow Industrials down more than 1,000 points
intra-day.
But there are a couple similarities between the
current rally and the “bulletproof” rally from Spring that I want to
point out.
First, there’s the relentless nature of both
rallies.
Next, when the “bulletproof” Spring rally ended,
there were signs on the chart that the bullish enthusiasm was starting to
wane. I’m not going to get into a long-winded explanation of those signs
here, but if you look closely at the S&P 500 chart I’ve included, you
can see the pause before the plunge…
*****Now I want to share a quote from trading
strategist Jason Cimpl’s morning alert to his TradeMaster Daily Stock
Alerts subscribers:
Overall, the bulls dominate this market. Either
add to current positions, or jump in banks and gold miners with tight
stops. No matter what, keep tight stops, if this market turns it will
happen quickly. Until it turns, and I have no reason to believe it
should, there are no reversal candles present, stay
longsided.
It is the phrase “no reversal candles present” that
is important. (Please understand that by “candles”, Jason means
candlestick glyphs that mark a day’s open price, closing price and
intra-day range.) Jason is basically saying that there no signs that the
current rally is about to reverse.
That’s a contrast to the “bulletproof” Spring rally.
Jason had begun warning his TradeMaster Daily Stock
Alerts members that weakness was showing in the chart
and that they should tighten their stop losses. In fact,
TradeMaster Daily Stock
Alerts exited all of their upside positions during the
morning of May 6, well before the flash crash occurred.
*****What’s my point in telling you this? Well,
aside from the fact that Jason is damn good at his job, I want us to
understand that the stock market has yet to show that the current rally
is weakening.