Last week I said the likelihood is that until we see a clear sign of exhaustion (like a monorail bar, railroad tracks or long-tailed doji) this market would keep grinding on.
We’ve had an amazing bullish run, but there are now palpable early warning signs that this party needs to end and will take a rest soon.
A high number of overextended reversal signals is the first sign, as well as the fact that there is a high number of overextended stocks in general, reflecting the overextended state of the main indices.
What this means is that there are fewer high quality opportunities around our favoured Key Levels, so if you haven’t participated in this run, don’t worry, there will be plenty of chances in 2024.
My expectation from here is that when a market high does get confirmed, it will be followed by a retracement down to a Key Level or thereabouts, which will then give us further opportunities.
The expected retracement will likely be lesser in percentage terms than previous downward retracements since July, and that will set the scene for a large number of bullish Shrinking Retracements setups.
I expect this scenario to materialise during Q1 of 2024.
So, as with last week, resist the urge to chase already overextended issues. Stick to the plan we talked about at the Stocks Summit.
It’s serving our members brilliantly, as recounted by so many members who have transformed their own performance by following our method and using our wonderfully focused time-saving tools.
— Guy Cohen