Click chart to enlarge We may be seeing the first signs of slowing momentum for the indexes today. There has been no break of any trendline or average, but this is not how a healthy Stage 2 chart rallies following five weeks of consolidation. The horizontal line drawn at the upper left on the chart of the S&P500 index above acted as resistance for over a month. Once broken, the chart should have rallied strongly to new highs without any hesitation. This would be textbook of how a chart breaks out into a higher trading range. Today's backpeddling just days after a feeble breakout does not bode well for the broader market. If this market doesn't pick up steam quickly and follow through on the rally it started, we may just be right that it's in its early stages of forming a top. If this is a top forming, the market will drop, then launch a rally that fails to make new highs. This would be the next sign. Finally, after failing to make new highs, it would break through the bottom of the trend channel and moving average. This is the scenario we're hoping for, but it's way too early to call it yet.
5 comments:
Why do you hope for a falling market? :D
Because we're in cash and looking to buy. A healthy 10% correction would be great right now. And it would bring the LED stocks back to a more reasonable valuation because when the market sells off, the speculative & overpriced momo stocks get hit hard and fast. If their run isn't over, they recover just as fast as they fell. Actually, they lead the market out of the correction and make new highs first. We don't think the run in LED stocks will be over for at least another 12 to 18 months, but it will be a rocky ride with some great entry points for patient investors. We're sitting on 95% cash, so a correction would be a gift right now.
Well, not for me! :D
Why do you think the market should continue to rally after 10 months of going straight up?
You may be right on a fundamental basis, particulary if unemployment picks up and rates stay down. But just out of pure ennui, people change the trend every 9 months or so if it hasn't already happened for a better reason that boredom.
I don't think anything. I just trade what I see. I don't know what's gonna happen and frankly I don't care either. :)
Right now I have some longs and I would like to see those stocks to go up and not down, that's all. :)
If I have to say something I would bet on the downside to the 50SMA on the SP500 because the momentum is not too impressive. On the DJIA this is clearer. But right now I don't think the market will fall like a stone.
While the main indices did go sideways or up I could see a bunch of stocks with nice corrections. The problem is the big banks (GS, MS, USB, WFC, JPM) are below the downtrending 50SMA and in my eyes this means they're in a midterm downtrend and without them the market won't go too much higher.
Sorry for my English.
Happy new year! In Hungary we are in 2010 within 2 minutes... :)
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