Dow Theory Non-Confirmation!

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Table of Contents

• Reading Recommendation

• Summary

• Dow Theory Non-Confirmation!

• Technical Picture

• Sentiment

• Bitcoin Buzz

• Cycles Update

• Major Indexes Cycle Price Projections and EW Coun …

• VXX Update

• Annex 1 – HYG, High Yield Corporate Bond

• Annex 2 – MSFT, One of Magnificent 7

Reading Recommendation

Summary

• The consolidation/pullback suggested on Tuesday appears to have started, and it could last into early next week;

• After that, I expect another attempt higher into the second part of January, by most major indexes;

• Keep in mind also a positive seasonality bias in the first couple of days of February (401k inflows);

• But most relevant cycles should peak in January, including the N20W cycle, and then should have a correction into the March-April period, but more about that cycle trough after we confirm the reversal.

Dow Theory Non-Confirmation!

• Shall we get a Dow Theory sell signal soon? Check it out in my recent YouTube (YT) video about DJI. 

Technical Picture

• Major SPX and NDX are overbought on 1H chats and need to digest recent gains;

• Medium- and long-term technical indicators are not bullish even though indexes could still attempt to push higher in January;

• Figure 1 shows a QQQ weekly chart with RSI, MACD, and the QQQ/DIA ratio (in the uppermost window);

• There are strong negative divergences of RSI and MACD relative to QQQ;

• Notably, QQQ/DIA is at over 20-year extreme, except for the very extreme value in 2021 – This ratio, which also indicates extreme speculative sentiment, should revert to the mean, likely by QQQ correcting more than DIA over time. It has started to correct and may do more of it in 2024.

Sentiment

• Intermediate-term sentiment indicators started to reset but have a long way to go before the “fear” becomes prevalent;

• CNN’s Fear & Greed Index pushed to extreme greed, barely, on Wednesday;

• Figure 2 shows the Smart Money (good market timers) / Dumb Money (bad market timers);

• It is still in the bearish territory, and a long way to get over the green dashed line when investors/traders should look to take long positions.

Bitcoin Buzz

• The SEC approved on Wednesday Bitcoin ETFs

  • Bitcoin ETFs Win SEC Approval, Bringing Easier Access to Biggest Cryptocurrency

• Bitcoin satisfied all UP targets, i.e. there are no higher cycle projections;

• The approval did not generate excitement up, as many expected, more like “buy the rumor, sell the news,” as I speculated on Tuesday;

Check our recent YouTube Bitcoin analysis video (it is still relevant);

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