I am beginning to see squiggled lines even with my eyes closed. After reviewing the entire S&P 500 index I am creating a list of potential setups that I personally like for a good risk/reward trades. Trying to put the pieces of it together now.
There was little news today to create the market advance. Watching the S&P 500 move above the important 920 resistance level came with no fanfare. I would have expected to see a surge in volume when that level was breached, instead it was as if the index just floated past 920.
When important technical levels are breached one always wants to see high volume levels to confirm it. The move today did not have any volume confirmation with it. But, even with the light volume advancement the market technicians will be quick to point out that this lays the track for a bear market rally. All it needs is a confirmation move on Monday (with volume) to add credibility to today’s breach of the 920 level.
Monday will be important for a couple of reasons. First will be the return of volume levels that will be more convincing for verification of pattern breaks on the charts. Secondly, the escalating conflict in the Middle East may have a material impact on the market Monday if Israeli forces begin a ground invasion of the Gaza Strip. We have already witnessed crude oil move up in the past few sessions on the technicals coupled with the Mid-East tensions. Any escalation in the conflict over the weekend may send oil much higher and this would impact the futures market as well I surmise. We have to wait and see what unfolds.
I maintain that any counter-trend rally (bear market rally) should be sold into, not bought. There will be quick
trades on the way up and of course on the way back down. But, this bear market rally should not be considered an entry point for long term investments.
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{ 2 comments }
Chuck, I am looking forward with anticipation for your list of good/bad stocks. I marvel at your ambition!
For a different view, here is a comparison of the stock market during a recession/depression:
http://dshort.com/charts/bears/four-bears-large.gif
It is current to the end of the year.
This chart compares today with the Japanese meltdown. Ouch!
http://dshort.com/charts/bears/mega-bear-quartet-large.gif
All courtesy of the blog Dshort.com
Chuck, your last statement refers to this as a “bear market..that should not be considered an entry point for long term investments…”
These summaries–apart from your technical comments–help a lot of us out here understand what is going on.
Thank you.