Don,
When I look at the way the stars have aligned themselves, I am seeing prices that appear ready to head higher. Looking at the major avgs. prices are at what I often refer to as a "technical do or die" position. This happens when prices within a trend work their way into an area where they encounter some sort of major obstacle. A good example would be the current chart for the S&P. On the 13th (April) prices hit 1362.35 after which the market immediately weakened forcing prices back down to the 1284 area (1-week). Prices stablized and immediately headed higher. Look at the action of the past couple of days. From that bottom prices have turned up strongly closing at the highs of day. The last two days prices are retesting the old high set roughly a week ago. So this trend will have to resolve itself in one of two ways - either a breakout through the old highs or that high will prove too much resistance and prices will breakdown. Now the action of the past couple of months has really been tricky in that the indexes have individually marched to a different beat. This has made our job on this thread difficult because their prices have moved contrary to one another. In an ideal bull market according to Dow theory their overall direction should compliment one another. This has not been the case lately. But if you look at the market now the S&P is one day away from it's old high,,,the NAZ has already taken it's high out today,,,the DOW is also one day away from taking out it's high of a week ago,,,the RUT today took out on an intra-day basis the highs set back in January and is only one day away from taking it out on a closing basis. I am saying one day away because prices have no other place to go. They are going to either break through and hold it or fail and collapse. Per our conversation of today and this weekend, the one major obstacle to an advancing market would be the current state on rates. The Utilities, imo, are pointing to a breakout of the pattern established since September 98. It's dangerous to assume but when I view their chart in the context of the prices on the major indexes it really does appear that rates may actually be headed lower. The market is almost telegraphing it. But yet I still believe that THIS interest rate environment could change very quickly by some piece of news, which could indeed cause the patterns described above to fail sending the markets lower.
When I look at the charts on the individual companies starting with the nutz I am seeing prices that could literally explode through resistance area. Look at the kingpin AOL which was up $15 today. It closed at the high of the day right at a key resistance area. It honestly looks like it could slice through that area into a whole different level. YHOO looks similar. The bandwidth stocks - LVLT, QWST, RNWK also look explosive here. The high tech generals MSFT, INTC, DELL are also right at resistance areas although I will admit I have seen better looking chart patterns.
There are still some divergences out there to confuse things. With the DOW right at that critical area you would expect to see some of the stocks that represent that issue in a similar position. However, look at what happened to JPM today in the banking group down $5. What does that say about rates? Or how about the weakness in CMB or MRK. So the picture is still not as clear as I would like.
So let me just say that tomorrow's action should tell us much about the immediate strength of this recent leg up. These divergences really are enough to make your head hurt.
Good luck trading.
SO |
