Click chart to enlarge The chart above is a chart of DDM... same thing as the Dow for the intents of this post. The channel has clearly been broken. It's too early to say if this is the start of a return to the lows yet, but it's fair to say that the momentum has changed. This is no longer a dip within the channel, but rather a change of sentiment for the market. At least for the short term, there's been a shift from the recent "buy the dips" mentality to a new "sell the rallies" mentality. If we gap up on Monday, people will be looking to sell at the recent highs rather than buy into the upward momentum. Like we said in a previous post, when the channel breaks, it is a swift and decisive move. It doesn't just slowly go sideways through the support. It just drops.
16 comments:
Thanks for the update snot. I was wondering if the action today was enough to call the channel broken, or if we needed to wait for the close before making the call...
RL
Anon: don't worry we will be back in the channel shortly. Keep your sentiment towards buy the dip please.
That was an ugly day, even though consumer good and health care stocks (in my mutuals) held up nicely for me. I was planning on going to 40% cash when the DOW reached 7700. Instead I went to 40% cash as the DOW went South on me today. How much does this have to do with the 90% tax on AIG bonuses? If Wall Street thinks that dealing with Pennsylvania Avenue means that the rules might get changed retroactively and that big shots can't make millions anymore, then is Wall Street not going to play ball with Obama and Nancy and Harry and Barney?
Joe
AIG Security Memo
http://1.bp.blogspot.com/_uIpart1IM-0/ScQOvlmou8I/AAAAAAAAATU/fIZ6n5Vz5R0/s1600-h/custom_1237492278757_AIGMemo1.jpg
http://2.bp.blogspot.com/_uIpart1IM-0/ScQOvARrEWI/AAAAAAAAATM/LxnSBj1Khnk/s1600-h/custom_1237492804732_AIGMemo2_01.jpg
Snot, in what city do you see the high end real estate picking up?
Anon: which channel are you referring to? the current 2-week bear market rally (dead cat bounce) or the 18 month down-trending channel (that we are still in even with this dead cat bounce)?
RL
snot: i appreciate the charts you post very much. i thought i'd try to contribute a chart of my own. The linked chart is the DJI over the past year using 1 week candles. i've drawn a down-trending upper channel line which I think shows that the current 2 week bear market rally ran right into that line and then came down off it slightly to close out the week.
if i had to guess i would think we should move down from here based on this. but, should we break through the trendline, it would seem to be a pretty bullish move at that point?
looking forward to your analysis
RL
^DJI 1 year chart
Just when we almost forgot about Geithner and his bank bailout plan, it looks like he's ready to announce details on Monday. We just might get that gap up Monday morning that Snot mentioned in anticipation of the details.
Question is, can Geithner's plan trump the beginning of the "technical pullback" that the market looks like it's already started? Could his plan be good for a DOW pop to 7700-7800 next week? Would be perfect timing because that way the DOW could pullback 10% (7800 down to 7K) which of course CNBC would attribute to earnings no matter how they come in.
Go Timmy go!!
Steve W.: buy the rumors, sell the news...
Sounds like the famous economist agrees with several of the posters on this blog.
corruption article
Icon, are you adding any more FAZ, SRS or SKF today?
Well today sure answered my question from Saturday.
Snot, did you sell anything into today's strength or are you holding out for more gain?
My current target for XLF is right around $10, or about $36.50 on IYF. I'll bite at that time. Hopefully LDK will be at my 5.75 target at that same time.
What did I say; back in the channel anon; keep your mojo up and don't worry about channel breaks.
New York was where we said the high end housing market was picking up after a 2 year lull. High end real estate is the earliest sign of a recovery.
We haven't sold anything yet, but if we get a continuation of this rally into tomorrow morning, we'll have to sell the SSO we bought at Dow 6700/6800. Our target for the Dow was the high 7,000's, perhaps 8,000. Now that the Dow is approaching the 75 day moving average and the top of its downtrending channel, it's time for us to scale back and wait. If it goes higher, we'll be making a profit. We'd prefer it hit resistance and plunge, however.
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