Technical Chart Question

With the news from the German high court, expectations China is done raising rates, and some better comments out of Trichet world markets rallied with gusto from a technically oversold point, good evaluation, and total exhaustion from sellers.

Albeit volume in the U.S. was extremely light, but we probably can ignore this given the volume overall for this bull cyclical rally that started in 2009.

A recent failure occurred at the 30 day moving average on the S&P last Thursday. Last Thursday the 30 day was 1220 S&P. Today’s rally took us right to the 30 day now at 1198-1200.

So the question is will we fail here at the 30 day moving average ?

Looking at the chart above some technical indicators suggest we still have room to rally. It seems we have some room up to the 50 day MA of 1248, but we will find resistance at 1206 & 1220 which were previous supports turning into resistance.

Also take note how one days rally has put us near overbot conditions.

Hopefully, tomorrow’s continuing claims will be a good number to give us follow through.

For some reason i had trouble loading  a P&F chart. Hopefully, this link will work. The count on the P&F chart gives us 7 counts and today we made 4. Depending on what theory you follow 3 more counts takes us between 1206 and 1220 S&P.

All in all, a strong argument can be made for a triple bottom and the transports may have four to five bottoms.

Essentially, a total risk on is only in place with a strong rally through the 1248 for at least three closing prices. Until then expect a lot of flip flopping on the movng averages as we do not know three key elements.

1) Although the German court ruled in favor of Merkel continuing to support EU bailouts with  Parliament approvals; there is one more vote coming up on the 29th of September.

2) We are not sure wether the clam will announce the “twist and turn” or buying of long term treasuries and other paper.

3) Will the EU have the collective power to halt the current crisis. With comments like this  and this; it is hard to determine what the fate of the Euro and the union really is.

It is wise to consider putting some hedges on if we get some more upside over the next few days of trade. Technically, we are broken and the banking sector remains a huge question mark both at home and abroad.

Also keep in mind that most analysts have not ratcheted down earnings for the S&P. A lot of analysts are still in the $100-$105 camp. The last Q showed us that there could be a 15-30% haircut in store for earnings….and that is in every sector across the board.

Today’s rally was nice and we’ll take it, but i think we would have seen a more substantial rally if we had substantial news to confirm problems are getting fixed for real.

Markets need more than just cocaine to act insane to the upside…..

 

GLT

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