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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Lachesis Atropos who wrote (40041)	8/13/2003 12:43:31 PM
From: Lachesis Atropos	Respond to of 69259

CHARLES BASSETTI: A Market for Traders, Not Investors We remain convinced long-term bears. The major indices have recently given a buy signal which we regard as a bull trap, although disciplined methodology requires a minor commitment. We regard everything which has happened since March 1 03 as a pullback to the neckline of the 5 year head and shoulders. There is absolutely no long term hope for long positions here. A maximum fantasy might be 10800 basis the Dow. Being realistic analysts, if the rally continues we will make further commitments and seize the first opportunity to get short at higher prices. Meanwhile the Dow is completing the right shoulder of a head and shoulders top which, if you were an orthodox measurer, would forecast a Dow below 3000. Of course, the average investor reads analyses like this and quickly turns away in boredom or disbelief. "So what's it gonna do right now, already?" he says. Well, right now what it's doing is equivocating. Since July 1 03 it has been dallying between that low and the high of June, forming a perfect rectangle. An upside breakout should give bulls a little more action on the upside. A downside breakout might be the beginning of the avalanche. "So what's to do already?" our frustrated reader asks. Well, we have been saying for some months that a fortune was going to be made on the short side of bonds. (Don't try this at home without professional help.) Or, if you want something not quite so fast, how about gold which is completing a 7 year rounding bottom, and soon you will be able to trade it as an ishare, which may be just what gold needs to take off. (Don't try this at home either, unless you have a race driver's license.) Here is gold, neatly contained within a decision making triangle. Naive uneducated trading is not advised but competent traders will see the opportunity and the risk. Charles Bassetti is the Editor and Coauthor of the classic reference, Technical Analysis of Stock Trends, first written by Robert D. Edwards and John Magee in 1948. He currently teaches technical analysis at Golden Gate University in San Francisco. -------------------------------------------------------------------------------- STEVE NISON: Watching the S&P 500 One of the major advantages of candlestick charts is that because they use the same date as a bar chart (open, high, low and close) we can use all classic Western charting techniques on the candlestick chart. As such, using a candlestick chart offers the flexibility of using either Western technical analysis or candlestick analysis or a combination of both. With this in mind, there is a western technique relevant to the current market. I call it The Change of Polarity Principle. It's a classic Western charting technique in which a prior resistance area, once broken should become support on any corrections. Specifically, looking at the weekly cash S&P chart below we can see it has been in a trading range since August as defined by approximately 770 to 960. In June it broke above the top end of the range. Some candlestick signals, including a shooting star and doji, short-circuited the rally in early June. However, based on the aforementioned change of polarity principle in which prior resistance can convert to new support, as long as the prior resistance area holds (based on a weekly close) the bulls are still in control. A close over 920 would imply the bulls have regained control. However, if we see a weekly close under say, 950 it could have bearish applications since it would show that the new highs were unable to be maintained by the bulls. This last thought also brings out a powerful concept ala technical analysis; there is should always a price that says you're wrong! Properly used technical analysis can help foster a risk and money management approach to trading or investing in the markets. Steve Nison is a Certified Market Technician and author of several acclaimed books, including Japanese Candlestick Techniques. You can sign up for Steve's free newsletter by going to www.candlecharts.com. To learn more about constructing candlesticks, follow this link to read Candlestick Basics.