Market Thoughts and Charts, Charts, Charts !!!
After the bounce on Friday, many in the media and dead fish community, are calling for a short term bottom.
I find this logic absolutely preposterous and idiotic.
Granted there were a lot of very bad news on Friday (INTC, TYC, etc...) and the markets were able to stage a reasonable bounce from the lows of the day.
But keep in mind NAZ was still -19 and DOW -34 even after the bounce, not exactly chop liver.
Large gap down day are usually the hardest to trade and Friday was no different.
But when you think about it and look at the charts the small bounce should of been expected.
vtoreport.com
saavycharts.com
Looking at the above charts, you can clearly see that DOW had support at 9500 and if you recall my comments from earlier in the week a small bounce made sense.
"In bear markets, indexes usually bounce on the initial test of a major support level, only to fail miserably on the second test"
Dow had the initial test Friday and next test of 9500 will fall with force. (9000 is next major support after 9500)
This could happen any day or it could take 1-2 weeks or maybe after quarter end, but the break is coming almost for sure.
Looking at the NAZ daily from above saavy chart, you can clearly see the bottom of the down channel ran though 1500 which is support for now.
General rule of thumb on channels: Down channels most often break the upside resistance, but rarely the downside while the channel/market moves down. Vice versa for Up Channels.
The longer the channel, the truer the rule.
This was a major reason NAZ 1500 held for now in my eyes.
By the way, when down channels break their support, it gets ugly fast for next 2-3 days and often the index will bounce hard afterwards
NAZ 1550 was major support and has become major resistance.
Notice what happen when NAZ broke major 1700 support - a nice break occurred followed by a bounce to top of channel and then death once again.
Something very similar should happen now, not necessarily right away as the channel needs time to allow for lower prices.
When the bounce does occur there are 3 key levels to watch:
1. NAZ 1550 is the first hurdle, significant resistance but the least resistance of the 3 levels.
2. NAZ 1600 is the following hurdle, clearly seen from this chart:
bigcharts.marketwatch.com
This is actually a huge resistance point now especially when you considering the much longer time frame.
3. Top of the channel is the breakout point, which would neutralize the current bear trend. Currently runs through approximately 1700.
Keep in mind that as time passes the top of the channel gets lower, so #2 eventually could become lower than #3.
Most likely scenario >>> over the next 1-2 weeks the NAZ goes lower to the 1460-1480 level as the bottom of the channel is lowered, then or maybe even sooner a likely bounce will occur to 1550 or maybe even 1600 before the eventual move to retest major long term support of NAZ 1400 seen on the bigchart above.
Getting back to the media and dead fish community >>>>> there is zero catalyst for any meaningful bounce other then technical. The market needs pessimism to make a true bottom. Right now there just isn't enough of that as many are screaming bottom.
Market needs 9/11 kind of pessimism, not optimistic buy the bottom moronic thinking, to take a solid stand.
Long as the bagholders are screaming "BOTTOM" it just wont happen and the slow bleed will just keep on coming.
In coming months VALUATION will rule and right now that an ugly word on wall street as there is still a ton of fat left to burn.
Every new economic number is slightly better, every old one is revised down and investors are just not buying this recovery to mean much higher earnings or higher prices.
Case in point >>> last week every number was better and every day market sold off.
When you are married to a 1000 pound PIG, which goes on a diet and is now 500 pounds >>>>> you still have a huge PIG on your hands and you are still sleeping in the garage or else you are BLIND.
Makes you wonder why you got married to the PIG in the first place !!!
Here are some more interesting charts to view:
stockwerld.com
stockcharts.com
stockcharts.com
stockcharts.com[s2185343]&disp=O
For individual stocks: (make sure to view all 6 pages)
stockcharts.com
Great chart site to bookmark:
stockcharts.com
schaeffersresearch.com
Happy Trading
Michail
TraderPulse.Com |
