Stock Market Pause as Pelosi Moves on Trump…

Stock Market Pause
Stock Market Pause as Pelosi Moves on Trump…

Here’s a surprise…

US President Donald Trump has a new enemy to go after…Nancy Pelosi. I suppose you can’t blame him…she wants to impeach him!

And all this with the 2020 presidential election coming up.

The Donald was never going to go into this without another scrap.

Somehow, the Ukraine got involved in the mix.

Now, it seems we’ve got a bit of a problem.

Did someone say Russia 2016?

Impeachment in the charts

Perhaps we shouldn’t worry.

Let’s not forget that both Nixon and Clinton faced impeachment proceedings.

The world kept turning.

But, what does it mean for stocks?

Today, I want to talk about the share market and some short-term trends I’m seeing.

Let’s get stuck in. Look at the chart below…


Dow Jones Weekly Chart - Stock Market

Source: Optuma

What you’re looking at above is a weekly bar chart of the Dow Jones index.

I’ve also ‘overlayed’ major swings to ease out the visual of the big moves.

It’s no secret that since 2017, the stock market has been extremely volatile.

What we are witnessing right now is a sideways market.

That means there is no clear trend either higher or lower.

And this is beginning to look a lot like ‘pennant’ pattern.

Pennant patterns are naturally formed in the market during times of consolidation.

Meaning, the trend usually resumes when it breaks higher.

However, what I’m seeing on a shorter-term basis is a rising pennant pattern which could signal a topping formation.

You may not agree.

One of the biggest problems with technical analysis is that each technician views the market in a unique way.

We’ve been here before

This is called the ‘art’ of trading.

Look at what I mean on the chart below:

Stock Market Pause - Weekly Chart

Source: Optuma

When markets are forming these patterns, it’s usually best to wait.

That usually means you sit idle in cash or reduce your exposure to volatile and risky assets like shares.

Now, as an Aussie, you might be thinking  ‘why do I care about the Dow Jones index?’

Many traders look to this market as the first point of call of what may occur locally.

Now it doesn’t always work that way.

A falling US market doesn’t guarantee a falling Aussie market. But there’s no doubt the US sets the tone for the financial world.

Right now I want to be patient and not load up unnecessarily.

A colleague of mine still thinks the markets are going to melt-up.

But I need to see some confirmation from the chart before acting on this idea.

I want the Dow Jones to break above its highs in a way that confirms a new uptrend.

Until then, I’m simply not going to buy into this push higher.

Nearing the end of 2019 as we are, now isn’t the right time to be taking rash bets.

You want an opportunity, here it is…

Let’s recap…

For a while now, you’ve heard us shout ‘be cautiously bullish’.

It was intentional and, so far, the right thing to say.

This allowed us to take some calculated bets in the market. That’s been a good strategy this year.

I’m not a buy and hold investor.

My concern is that if the Dow Jones doesn’t break into sustained new highs, it could go the opposite way and see a slow deathly decline. Hence my caution.

It’s OK to sit out of the stock market on the sidelines. There’s no extra reward for activity.

However, as soon as I think the time’s right to act, you’ll be the first to know.

Until next time,

Jonathan Evans Signature

Jonathan Evans,
Analyst, Profit Watch