Where to Now?

I was going to conclude the blog on Mental Models, but my body is in an uncooperative mood. Earlier this month, I succumbed to a bout of the flu; now I have swollen feet and a sore back if I spend more than 40-minutes sitting.

So, keeping this post short.

Are the US indices ready to break out of their August doldrums?

Four US Indices, charts through the courtesy of MarletAnalyst

The chart above shows that in the past two days, we have seen the indices:

• Attempt to move up on either below normal volume and range (bearish if sellers come in) or
• Below average range and average volume (more bearish as it suggests we are seeing weak buyers). The sellers still need to come in for the bear to roar.

Of more interest are the  DJIA and Russell 2000.

The DJIA is showing a 5-day Expanding Terminal. It’s what a call a Forecasting Pattern – if triggered, it usually means an 18-day change in trend.  The trigger?

A bearish conviction close below 25,590.

The Russel 200 is exhibiting another type of Forecasting Pattern: the Complex Horizontal Terminal. The 18-day change in trend is triggered by a bearish conviction close below 1703.40

Natch, the triggers need not occur – we may see a strong upside breakout.

Let’s see what happens.