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Pastimes : The Philosophical Porch

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From: Rarebird	7/21/2009 7:13:24 AM
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Transcendental Market Fragments: S&P 500: It would be an ideal situation were the SPX to tag the trendline connecting the 1982-1994-2002-2003 lows. That trendline was expected to hold market pullbacks into the next decade, but was decisively broken last year in the unwinding of the greatest financial bubble in recorded history. That breakage confirmed the end of the long term bull market. Since a broken support line acts as a magnet for prices to retest from underneath, I have been looking for the market to rally up to test that old support line once again. The market got close in June and it is close now. The line will be at 973.53 on Tuesday. The SPX closed at 950.54 on Monday, only 23 points below that key line. A test there would mark a once-in-a-decade chance to sell the market short with a close stop loss order to cover if the market blasts through the line (not expected on a first attempt, but anything is always possible). T Theory: As I mentioned before, Terry Laundry is bullish for an uptrend lasting into late 2010. His bullish stance is based upon the Advance-Decline T: ttheory.typepad.com Terry has done extensive research on this T going back many decades, so his bullish position has a basis in solid research. The only problem I have with this is that the market includes a huge number of non-operating companies today which it did not have in decades past (ETFs are one such trading vehicle). The common stock only Advance-Decline Line is far weaker than the all-security Advance-Decline Line which Terry is using via StockCharts.com. Time will tell which is the more reliable indicator. The common stock only A-D Line may break out like the all-security A-D Line, but it has NOT done so yet. Bottom Line: The runup in stocks appears to be terminal and a reversal Tuesday or Wednesday should be expected.

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