NOV 25 INDEX UPDATE:
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Short-term technical readings:
DOW - lower midrange
SPX - lower midrange
OEX - lower midrange
NAZ - lower midrange
NDX - lower midrange
VIX - 29.58, upper midrange(inverse to market)
CBOE PUT:CALL RATIO - .59
5-DAY TRIN - 6.48
Per my short-term analysis the overall market is in the lower midrange, close to the oversold region, so there is more upside potential room than downside. It is also common that even in strong downtrends that my short-term technicals at least get back to the midrange before reversing back down, so I believe that there is more upside. Whether the upside comes immediately or by a ZIG-ZAGGING inclining pattern, I dont know for sure.
The 5-DAY TRIN is still firmly in short-term BUY TERRITORY.
The PUT:CALL RATIO at .59 is back in neutral territory, however I would have preferred that it stayed over .6 a bit longer, which is bullish territory. Interesting how fast the PUT:CALL ratio drops, which is still giving hints of some complacency, which could also be a hint that the MAJOR BOTTOM still has not been set.
Market internals(NEW HIGHs/LOWs) have improved, but I wont make too much of it yet since FRI was a half-day and its need more follow-thru. At least it is off on the right foot.
Now the question is how high will this rally take us, or will it be just another 1-2 day rally which has been common since SEPT. I feel the key to the height of this rally will be with the NAZ/NDX, and the next obstacle to the upside is to break out of the BULLISH WEDGE to the upside.
For the NDX, the UPPER TRENDLINE of the BULLISH WEDGE is around 2885 for MON and 2850 for TUE, so it is declining at the approximate rate of 35 points per day. The NDX closed at 2830 on FRI, so this upper trendline of the BULLISH WEDGE is the first key resistance. It is common that a break of a chart formation produces a strong move.
Based on 2667, assuming that was the interim bottom, here are the FIBONACCI REBOUND LEVELs calculated from the SEPT PEAK of 4080 and the OCT PEAK of 3380:
4080-2667 = 3204(38%) 3374(50%) 3543(62%)
3380-2667 = 2938(38%) 3024(50%) 3109(62%)
There is also another important trendline for the NDX. Connect the intraday highs of 9/20, 9/21, 9/25, 9/28, 10/20, 10/23, 10/24, 11/6. That trendline is around 3190-3150 for next week.
So if the BULLISH WEDGE is broken to the upside I suspect that the next resistance area is around 3100-3200. From a rough calculation, if the NDX did reach the 3100-3200 region by next week/early following week, my short-term technicals would be in the overbought/CLASS sell region.
The market is also approaching some bullish and bearish seasonal issues. On the bullish side we have the END-of-month-RALLY, which statistically starts on the last 2 days of the month and last 3-5 days into the following month, and the Christmas rally(not sure when that commonly starts). On the bearish side, we have the warning season for the 4th quarter starting in early DEC, and the last minute tax selling, which I believe may be more towards the 2nd half of DEC. Subjectively, it appears that many companies have already started announcing their warnings, so Im not so sure how much of an effect that will have during early DEC. Of course if GE, or some other biggies warns - OUCH!!!
My MID-TERM CYCLE LOW arrived on NOV 21(TUE), with a buffer of a few days, and with FRIDAY's rally its off to a fair start. I only said FAIR since its been only 1 day so far for this rally and we all know that 1-2 day rallys have been common since SEPT.
Here are some things which I will be watching for to see if this rally has legs:
1) continued improvement in the market internals
2) the break of the BULLISH WEDGE to the upside in the NDX
3) SOX to continue to lead the NAZ/NDX to the upside
4) relative higher volumes on UP-DAYs
Previously mentioned, per our DIVERGENCE INDICATOR, the NDX had a POSITIVE DIVERGENCE while the DOW was NEUTRAL, so that was a hint that the DOW may start to lag the NAZ/NDX to the upside and with the possibility of EXTREME SECTOR ROTATION where the money may actually start to leave the DOW into the NAZ. Im more than inclined to say that the DOW may just lag the NAZ, rather than EXTREME SECTOR ROTATION, in light of the "3-WHITE SOLDIERS" still holding on the DOW, which Paul noticed.
If Monday is FLAT, many may automatically assume that the rally is weakening; however the market could also be setting up for the 3-DAY PATTERN where DAY-2(MON) is FLAT, and DAY-3(TUE) is up strong similar to DAY-1(FRI). If MON is a DOJI/SMALL BODY with shadows on both sides, the 3-DAY PATTERN is setting up, but if MON is a DOJI with no LOWER SHADOW and a LONG UPPER SHADOW(INVERTED HAMMER/GRAVESTONE DOJI) such may negate the possibility of a 3-DAY PATTERN. So if the market rallys significantly on MON it needs to keep the majority of its gains. If the NAZ was up over 200+ points on FRI, I would say there was a lesser chance of a 3-DAY pattern and be just a 1-2 day rally.
As bullish as this post sounds, we need to keep in mind that a retest of the 2667 lows is still likely.
Im suspecting the following pattern:
1) rally to continue into expiration week with normal oscillations
2) second half of DEC to see some sort of a retest of the 2667 lows, if it doesnt come earlier
3) stronger rally to start at the end of DEC/early JAN. |
