Click chart to enlargeThe chart above is a chart of SPY (S&P500). This way, we can't be accused of having a myopic, Dow-centric view of the market. The chart is virtually identical to the Dow in that both charts are flirting with their moving average. It happens to be the 75dma, but the actual number is irrelevant. All that matters is that it's the moving average that it hasn't been able to break for the past 8 months. The 4 small diagonal lines show the points where the index got rejected at this line. Needless to say, we're at a critical point. Do we break out or do we go for another test of the lows? We have no idea. All we know is that if the market drops, we're going to begin accumulating shares rapidly. If it continues to move higher without correcting, then we'll unload a small handful of shares at each resistance level. The next of these levels is at SPY 880 (Dow 8400), the Feb high. For the record, the 100dma is at SPY 840 (Dow 8125), within easy striking distance for tomorrow, and the 200dma (the important one) is at SPY 102 (Dow 9526).
Regardless of how you want to play it, it is important to take note that if the indexes break this moving average, it will be the most bullish move they've made since the start of this whole debacle. Don't expect fireworks, but do mark the day on your calendar.
11 comments:
So do you say the 8000 points level on the Dow is not a strong resistance? It makes me wonder, because the 8000 point level was the last support from last October to the big selloff in February.
8000 is a major resistance level. It's where the 75dma is right now. We were just looking beyond it for the next resistance levels, as we've already sold some DDM at around the current level.
GOOG layoffs.
http://money.cnn.com/2009/03/26/technology/google_layoffs/index.htm?postversion=2009032617
Icon, thanks for answering my questions regarding RSI. It is very kind of you.
Snot, What is your take on gold or gold mining stocks, specifically AUY? Yamana seems to be in a nice uptrend. Thanks ...
We don't follow gold. In bad times, we try to keep it as simple as possible... indexes only. If the economy does start to improve, as we believe, then gold could have a tough time going forward. If you are going to buy gold, you should look at the fertilizer stocks that are moving in lockstep with it, particularly MOS.
Beautiful chart Snot. I love technical analysis. The 75 DMA is the trend line that seems to be working with the index right now. It is not flat yet, but it almost it, so if we have not hit a bottom yet, it sure looks close.
Anyone hedging with SKF or FAZ? FAZ can go up fivefold if the market retests the lows, and its downside is probably only 50%. Wouldn't want to hold just FAZ, but as a hedge against longs it's tempting.
I have some FAZ to go with my UYG.
been buying it in the $19 range.
http://www.screencast.com/users/MarketMinotaur/folders/Jing/media/c5716318-7595-4769-897b-1f6bf59eccd2
GDX bounced off two rsi resistance lines today. It will generate a big sell signal unless it can manage to close on a potential support line at 36.95 (+/- 12 cents).
AUY has the same technical formation, bouncing off 2 rsi resistance lines. AUY potential support is at 8.77 for today. It is strange that Yamana is above support while GDX is currently below it... my guess is that Yamana is leading the rest of the miners today. At any rate I wouldnt be buying this sector even if both AUY and GDX close on potential support today. DZZ looks like the best way to play this sector at this time.
Icon, Thanks for your comments on AUY. That was not the answer I was expecting. I'll watch AUY more closely. What stop would you recommend?
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