The indexes appear poised to make a 4th stab at piercing resistance. The SPY could rally another 5 points and the Dow Jones another 400 points before encountering the down trend line and the area of the 200 day average. I continue to strongly believe that the markets will not be able to trade above this area for very long, if at all.
Still, one cannot fight the bullish tape. I think it makes sense to expect a break of the immediately overhead line of resistance. I expect that a break of this area will create a situation that is ripe for the resumption of the downtrend. It would not be surprising to see the indexes flirt with breakeven on the year, just to cause the most pain for shorts and to trick the longs into blowing their wads, before reversing.
The Nasdaq is still the most beaten down index. It could certainly rally higher here, break resistance, and still have a ways to go before the 200 day average and the primary downtrend line.
If the markets are going to break resistance in the next couple of days, they are going to have to find the strength to continue moving into a further overbought condition.Â
I am still long biased but have kept my hedges as they were added near the last top. As such, they are not causing too much pain, yet, although my QID is starting to worry me a bit.
we’ll break resistance … I thought there would be one downtrade left .. maybe its off the table after GOOG saved the planet.
I thought there was one shoe left to drop over this weekend. Well, I’ll know soon enough but we’re going higher in any case.
I’m reminded of Nassim Taleb’s axiom that the market will take the path that causes the most pain to the greatest amount of hedgers
Rule 5 – The markets will follow the path to hurt the highest number of hedgers. The best hedges are those you are the only one to put on.
http://www.fooledbyrandomness.com/jorion.html
I agree with your assessment. Maybe we can finally bust through, pull back nicely, and have this first layer of resistance turn into support before moving higher still. The market is going to have to work off the overbought condition at some point.
One thing that worries me – the energy, ag, and steel stock are very extended and due to have a nice sized pullback. They can’t go up forever like this unless these are starting climax runs. With that as a backdrop, I think the upside is limited even if resistance is broken. They’ve been carrying this market and I don’t see too much upside without them. The other possibility is they do start making climax runs, and the end of these runs in these leaders would signal the start of a new leg down in the overall market. Just my thoughts.
10:42 AM 04/18/08
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We need Cajun to get in here and do some Cajun man riffs on the above charts… y’know == “Cawn-JEST-EEON,” etc.
It’s the least he can do, being the only rich fucker around here and all.