Equities update going into Payrolls.

With payrolls today, followed by the Colombus Day holiday on Monday, basically just about anything can happen. Yesterday probably saw some position squaring going into this, I still favour the upside after this weeks price action, though I do have some concerns particularly with regard to Breadth which I covered in yesterday's post (which can be seen by clicking here). I would not be surprised however if there was some sort of test of the lower side of the recent rising channel of the past couple of weeks, particularly on a poor payroll number. (Hmmmmmm, perhaps a bit too much fence sitting)

Further to yesterday's posting regarding Breadth, I am posting a chart below showing a strong similarity between the way price action is unfolding now and how price action occurred in March/April this year. As the chart shows, both periods produced upward sloping rising channels, following a prior very strong rally. In addition in both cases Momentum started diverging, and as I mentioned yesterday, breadth, as measured by the '% of SP500 stocks above their 50 day moving average', was at levels suggesting a possible top soon.  I always like to point out that a re-occurrence of a price behaviour (particularly one event), does in no way mean a repeat is on the cards, however it is something I feel needs watching.  - A scenario I am considering is that the current QE fever, which is propping up stocks and continues to weaken the USD, plus hopes about the upcoming election, could be the spur that keeps the bull running for a few weeks longer. I know that is highly speculative, but certainly possible, after that then a possible top may start to form, or we could just drift off from here on a break of the lower channel. - Lots of options really, I guess best get payrolls over and done first. 

One further point, as I mentioned above, my bias is long right now, personally I am not actually long trading wise. My bias is long because current analysis on what has actually happened, suggests the upside is favoured at present, I am not actually long because I harbor too many doubts right now. If I decide to take a long position, it will probably only be short-term with a tight stop trailed higher. One of my anxieties, in addition to the above, and certain other issues raised in the past couple of weeks, is the inverse Head + Shoulders pattern, I am not a big fan of H+S patterns generally, particularly as continuation patterns, I find them somewhat unreliable as trading signals, however that does not mean they should be ignored. On the other hand I am a big fan of H+S failures, they tend to be far more reliable as indicators, though obviously a failure  is not currently a feature of this market at present.


Finally, something for the weekend. This week some unbelievable cycling skills from a young Scot Danny MacAskill , this is a video well worth watching, the backing track is pretty good too, enjoy:



Some nice cycling skills, but still probably easier than calling US equities over the past 6 months. 

Have a great weekend.