The best-looking setup on my charts is not a buy.
Everything is lined up. The market is coiling into a tight pennant, coming from strength, on volume that is finally rising instead of fading. It is locked and ready to rock and roll.
And I am not touching it, my loves. Not yet.
There is one thing missing that separates a setup that looks perfect from a move you can trust, and most people never wait for it. Let me show you what it is.
First, let me show you what has me excited, because the picture is a good one.
The market has been holding a pennant, which is when price coils into a tighter and tighter range. The wider the mouth at the base and the smaller it gets as it goes, here, here, here, the more likely it breaks out.
This one is coming from strength.
That matters, because a lot of pennants fail, and the way you tell the difference is volume. Here is what surprised me, baby.
Volume through June has been rising, not fading, which gives this pennant real power underneath it.
So we have everything. A coil from strength, rising volume, all the technicals lined up. This thing is locked and ready to rock and roll, and reading these tea leaves is what I do.
And it still is not enough.
Here is what I keep reminding myself. A setup, no matter how gorgeous, is just potential. It is a house.
You can build the most beautiful house on the block, all nice and gorgeous. But if you move in before it is finished and a hurricane comes, it is not so nice and gorgeous anymore.
The thing that turns a pretty setup into a real move is a catalyst. It is the reason the market finally breaks the range.
Think about the last big drop. The market was weak and coiling, and it just needed a reason to go. That reason turned out to be Iran, and down it went.
Now we have the same coil pointing the other way, up instead of down, and I keep asking myself the same question. What is the catalyst?
What does the market need to hear to finally break out to the upside?
I do not have that answer yet, and I will be honest with you about that. The build is there, and it is gorgeous.
But a beautiful build with no catalyst is a house with no one moving in.
So this is what I am watching for over the weekend and into next week. Not a prettier chart, because it does not get much prettier than this.
I am watching for the reason. Big tech news, a surprise that gets the market going, something that hands this coil a push.
When that catalyst shows up and the setup is still intact, that is the move. Not before.
The setup only tells you where something could happen, and the catalyst is what tells you it finally is.
Until then, I am doing the hardest thing in trading, baby, which is sitting on my hands next to a gorgeous chart and waiting. I do not want to move into the Barbie Dream House before it is built.
Have a wonderful and safe Fourth of July, my loves. Watch the fireworks, hug your people, and let the market come to us next week.
Rock On,
Voz