INDEX UPDATE
---------------------------
All the major overseas markets, including JAPAN, and all the major U.S. indexes are severely overbought(CLASS SELLS).
A pattern that is common after a huge runup is that the first dip after topping off will be very small and could only last intraday. Then a retest of the highs occurs; if the HIGHs are not broken to the upside, then a DOUBLE TOP forms and the next dip is larger than the first one. As a rule of thumb, as I have mentioned before, I use 50%
of the upswing. However, since the recent upswing has been so strong, I feel that the 50% level is the maximum for that specific downswing.
So if 9400 is the top then I feel the maximum downswing would be 7900 for the larger downswing to start towards the middle/end of this week.
The bottom of this downswing will be a buying opportunity, unless it breaks 7400 to the downside, which I strong doubt will happen or even come close.
For the short-term the market is in an uptrend and could produce HIGHER HIGHs and HIGHER LOWs. Once the market stops producing HIGHER HIGHs, that would probably indicate the top of the trading range.
As previously mentioned, I am still not sure of the levels in the trading range. Originally, felt that 7700/7800 - 8400/8500, but it could get as high as 8750-8800. If it gets above 8800 then the market will return to a long-term uptrend.
I feel strongly that we are in a TRADING RANGE, and could be in it for several months. I feel this is good for the market, better than heading straight up at this time, since a strong upswing now back above 8800 to the 9000 range would only create a BUBBLE again. The logic behind this is that the longer we stay in a trading range the stronger the support becomes and a stronger base is formed for the market to make advances to the upside.
I feel that the fundamentals will now step in to determine direction in the future, specificly earnings and international economic issues.
Right now the S&P FUTURES are relatively flat, and some European markets are in the profit taking mode. So lets say that the market looks healthier.
Will this continue? Other indexes need to set higher highs and the market internals need to improve. If the NEW HIGHs can get back to over 100 soon and the NEW LOWs gets to 30 or lower, then that will be a strong positive for the market and confirm that we are in a trading range. If the NEW HIGHs start to approach 200 that would be a leading indicator that the market is returning to a longer-term uptrend. But if the market internals do not improve and starts to decline that would be a leading indicator in the opposite direction.
We now need to watch the fundamentals to determine direction. If ther is anyone who can keep us updated on the performance of the earnings as they arrive, would be of great help to all. The last I heard from FIRST CALL, last week, was that the earnings up to that time was not that good.
seeya |
