Equity Markets: Technical Update (11-28-08)
Looks like we’re in a bear flag or a rising wedge (close-up view). This pattern usually spikes higher and moves laterally toward the top of the flag/wedge and then falls off a cliff quickly. The volume should also be decreasing each day (regardless of whether it’s a holiday week or not). It’s important to short as quickly as possible because the breakdown almost always falls much faster than the time it took for the pattern to materialize. The top of this pattern must be paid attention to as it could be a false pattern. This is most easily determined by Fib retracement levels. I did lose a few % today covering some test shorts, but it’s all part of the game. Knowing when to let go of a position avoids ruin. Monday should give some additional guidance to short provided that the pattern doesn’t fail and monstrously breakout to the upside which I highly doubt will occur.
SPX 1-day
SPX 3-day
SPX 10-day
SPX 6-month
That settles it .. everyone on IBC is bearish for the next move. The Fly has not yet chimed in. I suspect he’ll change his tune by Monday.
nice work, WTA…
Do five black candles in a row give you some pause?
_________
Bruce, not sure if you were joking or not. I remain “non-ursine” as does the Fly, Chivas, Yogi-Booboo, and likely several others.
We may get a bit of a pullback — we have had five straight up days, after all — but it should be bought.
______
1 Fly vote equals 20 non-Fly votes, by the way.
5 black candles, where?
I think the size of the pullback on the first day it occurs will say whether it’s a reversal or continuation consolidation.
Sorry, should’ve said “bars” as in volume bars.
When was the last time we had five up days in a row?
______
Jake, I am very bearish for a trade … I think we need a healthy or not so healthy pullback before the assault on SPX 1000 and eventually 1200.
Way too long. I’m not sure.
Best 5-day gain since 1933, but then again, 1929-1933 was littered with double-digit weekly gains-losses.
Bruce, you may be right and that’s wholly logical.
But I’m getting the idea that this upmove may be as insanely unpredictable as the downmove was, and may leave even experienced traders saying “what…tha… faaaack??” in frustration.
___
you must be referring to the WTF pattern
The decline in volume as the rally progresses does give me pause. At the very least, a healthy rally should have sustained or increasing volume. What we’ve been seeing all year is increased selling volume and a decrease of up day volume. This has to reverse in order for a multi-month rally to occur, or for a bear market to end.
WTA-What are your thoughts of this goose stepping higher to 1000 or so and creating the other neckline in building a reverse h&s?
Jake …. do you agree with these fib numbers?
“Should the long term positive divergence hold for the next few weeks, Primary wave B should be underway. The likely target for Primary wave B remain at the long terms pivots: SPX 1107 and SPX 1179. SPX 1107 represents a 50% retracement of the bear market thus far. SPX 1179 represents a 61.8% retracement. These levels may appear to be quite optimistic. But the volatility is still there and the market is already up about 20% off the recent lows.”
Looking for volume and the rally monkey ….
Jake, certainly, it could go up, just the same as it went down, with very little to no pausing/consolidation/pullbacks.
By the way, I’m still bullish. I still have one long position, and will add more.
However, these swing trade systems that I trade are all calling for a pullback. So yes, I’m bearish, over the next 3-5 days. Then, I’ll buy again.
I’ll get a post up on all this soon. I’m stuck in Charleston tonight. Should have been back in Richmond tonight, but the wife and extended family bamboozled me with Jager and crab legs.
Should have been back in Richmond tonight, but the wife and extended family bamboozled me with Jager and crab legs.
I can think of worse places to be bamboozled, and under worse circumstances!
_________
E8 —
Here’s the two year fibs from the heights to the lows…
Using the 10/11/07 high of 1576 and the recent low on 11/21/08 of 741, I get the following retracements:
23.6%= 940
38.2% = 1062
50% = 1158
61.8% = 1258
I think we go at least to 1062 here, and would not be shocked in the least to see 1258 before we get another rollover in 2009.
__________
It’s possible, but I need to see some increasing volume on the up days. We could also be forming a bullish falling wedge, or we could drop another leg down. It’s simply too early to tell.
Weekly TA, either formation indicates lower lows. In addition, there are a couple of sectors that are in bearish flag formations. I believe we will see substantial lower lows before we get an intermediate low and a 60 - 120 day rally.
Yes. I would say a little over half are in bear flag formations, others are neutral, and utilities seem to be the closest to possibly forming an uptrend.
t
Five black candles. Not a pretty sight.
http://tinyurl.com/fundamentals1