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Joined Apr 1, 2010
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The Calm Before…


With the S&P 500 edging up 0.41% to close at 1102, this market is at a clear and undeniable crossroads. On the one hand, we have all of the makings of a bearish wedge, or continuation pattern, since finding a temporary low at 1040.  The updated and annotated daily chart of the S&P 500, seen below, should illustrate this notion.

Not only have we struggled to recapture the 200 day moving average, but volume has been steadily declining throughout our attempts to do so. This shows that the big institutions do not have much conviction in accumulating stocks, despite the most recent selloff.  On the other hand, the bulls can argue that the hammer from May 25th is still valid, and that some key stocks and indices are holding up well.

Moreover, the Nasdaq has already recaptured several important moving averages, as seen in the annotated daily chart below.

In sum, there are strong arguments in favor of both bulls and bears at this point. With that said, I am starting to see some enticing setups on the long side. I will post some trading ideas later this evening, but please keep in mind that I will be waiting for confirmation to the upside before acting on them.

Be back with more charts in a bit…

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  1. lindsay

    You’re doing a great job. Look forward to your potential long set ups. Thanks for all your hard work and consistent blogging.

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  2. Teahouse On The Tracks
    Teahouse On The Tracks

    OEW is skeptical as well:

    “At the recent SPX 1041 low we had the typical downtrend low indications: 1. a good support level – SPX 1045 was the low of the 4th wave of a lesser degree, 2. an oversold market – the weekly RSI hit oversold just like it did in February, and 3. positive divergences – divergences appeared on many time frames up to, and including, the daily charts. Yet, we hesitate to call it the downtrend low for three reasons: 1. the weakness in the Euro and associated credit fears persist, 2. the potential for a 4-year cycle low, and 3. the rally off the SPX 1041 low has not been that impressive. Ideally, we would like to see, at least a retest of the lows and an oversold Monthly RSI. To satisfy both conditions will take time and more downside pressure, at some point, on the markets.”

    “Objectively, the OEW 1146 pivot should be the maximum upside for this correction to continue. To break this pivot [and potentially end the correction] the SPX would have to exceed the 1150 Jan uptrend high, and retrace more than 61.8% of the entire correction. In example, the decline from 1220 to 1041 = 179 points, and a 61.8% retracement equals SPX 1052. This type of event would certainly generate further upside momentum. So far, from the SPX 1041 low on May 25th, the market has hit the OEW 1107 pivot twice; on May 27th and today.”

    Tomorrow’s Payroll Report should decide the outcome of the 1107 pivot point and the short term market direction, sans traps … s/b interesting day.

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  3. francesco

    everything old up fairly well as for givin still a “good” senso to this rally , today.

    The oil move was strong.
    The Euro still swimming on the big support area .. more time it passes .. less the “fresh air” to breath .. speculation/selling pressure is all about breaking down .. this can be somewhat touched, in price action and in charting .

    sill not sure about the honesty of this rally , here .. but the price / volume behavior still sold me on the long side of the trade , at least with my target in mind

    rally could be going up to 10400/500DJ , this IF we are in half- bearhands , now .

    If it stops lower , then I have not a theory or strategy , still .

    We will see , I’m intradayin’ ( ts, and bought 10000 crxx into the bell , let’s see if it playes the gap up / doji tomorrow )

    Thanks as always for the nice readings you’re giving

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  4. chessnwine

    Setups for Friday are up–check out my latest post above.

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