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Tuesday, June 19, 2012

Daily update

Buying frenzy.  We closed right on the upper red resistance line I have had on the chart for a long time.  We also have a blue bar so price is extended at resistance.  The weekly 18 SMA and the monthly 6 SMA are also right in this area.  If that is not enough there is the  .618 Fibonacci retracement line back to the 5/1 high.  Needless to say there are plenty of things that could provide resistance.  The question is will they.  We had 180 new highs today so that was a sign of strength.  A lot of people have suddenly become believers in the rally.  I have heard a number of people saying the trend is now up.  I don't have enough information to make that call.  The market internals improved considerably today.  There was a big jump in the stocks above the 40 and 200 day moving averages.  However, there is not enough strength to pronounce the trend is back up yet.  Check out the daily SPX chart.

 It looks a lot like an ABC type corrective move.  Here is an idealized view of the pattern.

This is about as close to a perfect match as you ever get in the markets.   This looks like a better fit to me then the sloppy inverse head and shoulder pattern everybody is talking about.  You can be your own judge on that one.  If this is a corrective move, then it is likely over and the market could fall out of bed again.  We will have to wait and see which pattern plays.

With this big run up and extended price into resistance I would expect a down day very soon.  They may use the FED meeting tomorrow as an excuse to take profits regardless of the result from the FED.  If that happens we will have to see where it shakes out.  We are still above the lower trend line so the bias is up until that line is broken.


1 comment:

Anonymous said...

Great post, Bob. Thank you. It is my personal opinion that the market is still "too high" for the Fed to introduce new easing. If I am correct, and the Fed announces nothing tomorrow, the markets could sell off hard in a 3 wave down.


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