This past week was quite a ride as the markets decided to break over 1084 testing higher. I've got to cheer on Andre because it's something that Andre had warned us about in last week's analysis! So ... let's see what Andre has in this weekend's update:
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November 15, 2009
Week-end Report
Turning Points
By Andre Gratian
The stock market has lost its homogeneity. The DJIA continues to forge ahead, while other indices such as the Russell 2000, Value Line, and Financial index are falling behind. The second strongest index is the NDX, and the SPX is third. Both the DJIA and the NDX have closed recently at new highs for the March rally. The SPX poked its head in new high territory, but could not close there.
The implications are clear! We are coming to the end of an intermediate move, and it’s only a question of time before we have a reversal of consequence.
This slow loss of the total market upward momentum is reflected in the performance of the A/D as well. Look at the daily SPX chart with the breadth indicator. In spite of a 70-point rally from 1030, the negative divergence which started to show a few week ago has not gone away, but the overall technical condition is mixed, with some missing pieces -- once again -- which prevent me from giving an outright sell signal.
The primary missing piece is still the same one: the sentiment indicator is, at best, neutral! Look at the chart of the SentimenTrader (gratefully borrowed from same) which follows. At best, the reading of the two indicators is neutral, which is not the signal normally associated with an important top. That does not mean that we cannot have a short-term decline or consolidation, but that would probably only make the short-term indicator more bullish. And, going back to the chart above, note that the price is still well above all the moving averages.
We are at a junction where many factors are influencing prices -- both ways! I’ll list some of them.
-- The long-term trend line is right above us and has already repealed prices once. This is resistance which will have to be penetrated to move higher.
-- The 30-day cycle, and probably another minor cycle, have just bottomed and are providing some upward push.
-- There are 2 more minor cycles bottoming on Monday around 2:30 which will give us the best clues by the amount of weakness they bring, and how much strength, after they make their lows.
-- The EW structure from 1030 suggests that we may have completed wave 4 of 5 of Friday, and that we still need to complete 5.-- The SPX broke out of its up-channel for the second time near Friday’s close, and rallied back up to it at the last minute.
-- The NDX continues to be stronger than the SPX.
And I could name a few more, such as what will the dollar do? With so many conflicting factors, how can one say how this will be resolved? We’ll have to wait for the market to tell us, but we should not have to wait beyond Monday
Let’s look at the hourly chart (below). We’ve already discussed many of its features in the daily updates. One which Idid not mention is that in the course of the rally, prices rose, once again, above what was once the major uptrend line (green). Since it comes exactly where the 50-HMA (blue) currently is, this should provide significant support, to which is added the blue-dashed internal trend line -- a parallel to the blue trend lines which delineate the broader channel in which prices are trading.
All these support lines should intersect at about 1085-1086 at about 2:30 on Monday, and if they are significantly penetrated to the downside, with no immediate re-bound by the close, we will probably have a short-term sell signal. If, on the other hand, we have a strong close, it will mean that we have completed wave 4 and have started wave 5.
You can see why Monday’s action is so important in defining the current trend, and why -- since there are so many factors to consider -- it is impossible to state decisively how it will resolve itself before it actually takes place.
If you are going to wait for the short-term pattern to complete itself with one more short-term wave to the upside -- as is suggested -- be aware that the intermediate condition is becoming more and more tenuous and can resolve itself to the downside at any time -- though it would be much clearer if we could get the sentiment indicator to give us a clear warning, first.
Andre
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