Break Out or Shake Out ?

PUBLISHED Jan 29, 2023, 1:45:45 AM        SHARE

img
imgTom Hamilton

**January 27, 2023 **- Well now, this was the week that saw trading above my “trading range rectangle”. The question now is this a breakout to new highs or just a shakeout of the shorts in the market?

Market Breath (advance / decline, new Highs vs. new Lows, Up/Down Volume and corporate & junk bonds vs. Treasuries) are showing positive signs. But on the opposite side, actual trading volume was modest / average on Friday with the close near the low. I’ve heard that much of this recent move was caused by the options market dealers unwinding short positions and not “actual” position buying. IF that’s the case we’ll know early next week. Plus the FED will announce their next action on Wednesday, February 1. Will it be + ½% or just ¼%? If it’s above ½%, the market will definitely drop hard.

I’ve laid out two scenarios on the chart above. The Red is the shake out idea and the Green is the more Bullish idea of going up to new swing highs. I tend to favor the Green route, but I am expecting a minor retracement lower before a spring higher in that case.

So this could be a significant turning point, so IF that were to happen I’ll be taking modest positions in the strongest sectors and if that continues, I’ll add to positions. I’ve been happy to be in Cash up till now. But as the British would say, “Wait For It !”. And I will.

Have a good week and be especially watchful on Wednesday afternoon around 2pm EST; the chairman speaks. ………. Tom ……….. Price chart by MetaStock; table by www.HighGrowthStock.com. Used with permission.



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