When markets stall and start moving sideways, technicians call it consolidation. Their explanation is that buyers and sellers are not overly committed and their shares just keep changing hands at a range bound pricing.
We look at it a little differently. Sideways action happens because there is not a consensus of cycles moving in the same direction – We call it sideways action. In essence, cycles are offsetting each other by moving in opposite directions. However, this phenomenon shouldn’t last too long as this year is coming to an end.
There is an abundance of reasons for trend movements, most of which center around the calendar, based on economic reports that are scheduled for weekly, monthly and quarterly announcement periods. The anticipation of those followed by their recognition creates waves of trading activity and only benefits those who anticipate them correctly.
Presently our cycle indicators dictate that markets will chop for a short time and that is exactly what they are doing – moving up and down – driving investors crazy. Then, when it’s cyclically time for markets to rally or drop, they’ll break out and do that too. There will always be daily news to justify that activity, but in the end, markets will end up travelling the path that is dictated by the interaction of cycles which are the underlying basis of their action. Because markets are still in a longer term bullish trend, rallies can turn out to be stronger than the declines. Such was the case on Friday Dec 4th. Shorting this market ahead of the year-end rally can be risky.
For our trading we see a strong possibility for entering Long position for our US and Canadian Index Trader systems in equities within a few day’s time frame. A healthy low is forming and the odds are high for a year-end rally. So stay fully tuned and alert. The odds of a short term rally soon are very high. Keep in mind that funds managers are hoping for the same thing because without it, there won’t be a year-end bonus if markets stay flat or go down.