Photo by JR Lancaster

These petroglyphs date back around 1500 years ago. However, they could just as easily have been drawn 150,000 years ago as drawn today. Why?

With hunters in pursuit, the herd mentality has both the antelope and the bison fleeing. The fastest and strongest of the herd will most likely escape. The slowest and the weakest are at risk of capture.

Since nobody wants to wind up as dinner for the clan, this photo represents traders running for the exits (or the weaker and nervous longs.)

With the Dow on new highs and trading in a consolidation pattern, those traders who got a head start on getting long are now taking profits. They will live to see another day to graze.

Those who may finally accept that this rally is real are usually the last ones to get in and the first ones to get caught. Whether they live to see another day to graze remains unclear.

The strong traders should be lightening up. The weaker ones should be perfecting their timing. Regardless, both should acknowledge that market corrections can also happen through time rather than price.

The Dow had a runaway gap last week. Defined as a gap to new all-time highs, we haven’t seen that occurrence since January 23, 2013. On that day, the DIA gapped up closing at 137.46. It finally ran out of steam on May 28, 2013, 4 months later. Naturally, there were ups and downs, but the overall uptrend remained steadfast.

Even after May 28^th, DIA had a substantial sell off only to resume the uptrend near the end of June into August. Then after another correction, it ran up again in September, then October finally peaking in May 2015 at 183.35. Until last week.

Now, DIA has a new runaway gap that only negates should DIA trade back down to 183.60. Therefore, we must prepare for not only a time correction, but also for the possibility that in spite of expected volatility along the way, DIA is heading higher!

How to avoid winding up as the clan’s dinner?

In light of thinking about the Russell 2000 and the rest of the Modern Family as geysers, dormant or active, try to assess how often the instruments might erupt and for how long. From there, if you are an active trader, buy dips into support and sell into rallies.

Keep an eye on DIA and Semiconductors, equally strong if not stronger. Both are clearly relaying the overall trend. If either or both fail, think of that as a predator wielding a spear heading your way-take heed of a more substantial correction forthcoming and get out of harm’s way.

It’s during the volatile times the petroglyph repeats its relevancy. In other words:

“You've got to know when to hold 'em
Know when to fold 'em
Know when to walk away
And know when to run
You never count your money
When you're sittin' at the table
There'll be time enough for counting
When the dealin's done” Kenny Rogers

S&P 500 (SPY) Consolidation. 215.31 support and Friday high point to clear

Russell 2000 (IWM) Needs to clear 120.42 for more upside. Narrow range and consolidation pattern. Under 118.83 expect to see 117.

Dow (DIA) Unless it trades down to 183.80 still has the runaway gap

Nasdaq (QQQ) 111.44 closest support level. Inside day which is good considering Netflix

XLF (Financials) 23.60 pivotal and where it closed again. If clears could see 23.80 or higher. 23.20 first line of support

KRE (Regional Banks) Holding 40.00- a good thing

SMH (Semiconductors) 60.15-20 should not be seen again for a long time if good

IYT (Transportation) 143 pivotal. 146.07 the 2016 high

IBB (Biotechnology) Must clear 274.81

XRT (Retail) Inside day

IYR (Real Estate) The quiet bull-looks higher still

ITB (US Home Construction) Consolidating

GLD (Gold Trust) What a lot of people I read do not get is that technicals have nothing to do with this once it has a mind of its own. Still bullish

SLV (Silver) 18.50 support and over 19.15 better

GDX (Gold Miners) Good consolidation near the highs.

USO (US Oil Fund) 10.64 the July low to hold

OIH (Oil Services) Still like the chart even if it’s taking some time to play out

TAN (Guggenheim Solar Energy) Back over 22 way better. 21.20 support

TLT (iShares 20+ Year Treasuries) Still has a small runaway gap in place. That is key-if holds and rallies more from here (better over 140) or fails 137.56

UUP (Dollar Bull) Unconfirmed accumulation phase

FXI (China Large Cap Fund) 34.60 support 38 resistance