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Strategies & Market Trends : Ask Vendit Off-Topic Questions -- Ignore unavailable to you. Want to Upgrade?

To: Vendit™ who wrote (4632)	2/5/2005 5:17:25 AM
From: Walkingshadow	Read Replies (3) \| Respond to of 8752

Hi Reid, Interesting day.... Non-Farm Payrolls comes in low, disappointing earnings and guidance, and the market rallies. I guess the "thinking" was that the weaker jobs report means the FOMC may slow the pace of tightening, also a big court ruling in favor of tobacco evidently helped. But I think things are setting up very nicely here for a resumption of the medium-term correction for several reasons. 1. QQQQ closed at $37.75 today. The "Danger Zone" dominated by the bearish power candlesticks looms close now, beginning above 38. 139.142.147.218 2. A print above $38.01 will mean the upside gap has closed on an intraday basis, $38.14 on a closing basis. Note that the 40 ema currently sits at $38.11. 139.142.147.218 That means a bit more rally on Monday, and the 40 ema and the closing of the upside gap will just about exactly coincide. Together, these will exert fairly strong resistance. 3. QQQQ is now at the middle of the BBs, a region of relative resistance. 4. The regression channel formed from the V-bottom reversal in August has been broken to the downside: 139.142.147.218 5. Despite the decent total volume today (about average, actually at 99 million shares) and bullish close, the volume patterns throughout the session were very bearish. 6. Volatilities are again testing 3-year lows: $VIX: stockcharts.com[w,a]waclyyay[df][pb10!b20][vc60]&pref=G $VXN: stockcharts.com[w,a]waclyyay[df][pb10!b20][vc60]&pref=G Both the $VIX and $VXN (also the Nasdaq 100 volatility index) are coiled and ready to rally now, which will exert downward pressure on stock prices: stockcharts.com[w,a]daclyyay[db][pb10!b20][vc60][iLp14,3,3!Lp14,3,5]&pref=G stockcharts.com[w,a]daclyyay[dc][pb10!b20][vc60][iLp14,3,3!Lp14,3,5]&pref=G 7. Oil now looks to be consolidating nicely at the $46 support level, and appears to be gathering up its strength for the next leg up: futuresource.com That could eventually cause some worries re FOMC inflation concerns. On the other hand, the rumors of the death of the dollar have been greatly exagerrated: futuresource.com and gold has fallen through a series of support levels and is heading south, probably after a brief relief rally: futuresource.com The scenario I see going forward looks like this: 1. Brief rally to $38.14 early in the week 2. Reversal to the downside there early in the week, probably around Tuesday or so. 3. Correction down over the next couple of weeks to support at the lower BB rail. This currently sits at $36.33, but as QQQQ trades down this will drop a bit. And, just below that, at $36.23, sits the all-important 200 sma: stockcharts.com[h,a]daclyyay[dd][pd20,2!b200][vc60]&pref=G 4. This point (36.23 - 36.33) represents a likely point where reversal and resumption of the long-term uptrend will occur. 5. IF that support doesn't hold, solid long-term support at $35 will be tested, and reversal there will then be extremely likely: 139.142.147.218 I think the chances that this lower support level at $35 will be tested are fairly good, but we'll have to see how the volume patterns develop as QQQQ trades down. If $35 ends up being the lower support tested, I think we'll see a surge of volume as this pivot is approached, indicative of big buyers pulling out all the stops, and THAT in turn will drive a sustained long-term uptrend. So I think short is the place to be, as I mentioned yesterday, but I would be prepared to flip long as the lower BB and 200 sma is approached. If that support is briefly broken, I don't think that breach will be confirmed by a lower low and a 50 sma/200 sma bear cross. Instead, that will mean that the long-term support at 35 will be an extremely likely reversal point where the medium-term correction will end. If the $36.23-$36.33 support defined by the 200 sma and lower BB is broken, I think that will be the signal to get out all the dry powder and get ready to throw every penny you can find into this market at $35. ..... all IMHO, of course..... T