Friday, March 17, 2006

Significant developments

SPX daily, remains on a buy signal from March 14. Technically we are at a very exciting juncture.

For the first time, we had a weekly close above the ascending wedge, since it begun in 2004. Ascending wedge is a technically bearish pattern. But on those rare occasions when we manage to break above the wedge, it becomes an extremely bullish pattern. It's a very significant development. Breaking out of the wedge is called a throwover, if it reverses quickly back into the wedge. So any failure here could be nasty. We need sustain above the upper trendline of the wedge to maintain a bullish posture going forward here.

On the otherhand, all the internals are pointing to a healthy breakout here. Nasdaq and Semis have been the laggards, which is keeping a lot of folks from not participating or not beleiving in this rally. The NYSE daily and the weekly cumulative A/D lines are blasting higher and are making new highs. The NYSE MCO has taken out the Feb highs. The MCSUMS on both the NYSE and Nasdaq have turned up. NYSE cumulative TICK and cumulative New highs- New lows are all making new highs. The OBV on SPX is at new highs. No diveregences anywhere, as far as the NYSE group of stocks are concerned. On the other hand, the Nasdaq internals, such as the weekly cumulative A/D line looks downright horrible, which is what is keeping the folks bearish. Every internal measure i am seeing on the NYSE are looking healthy at this juncture, which makes me beleive that this could be the real Mccoy !, after a year long trading range.

Here's another chart to put things in perspective. After breaking out above the 2002 highs in late 2004, we have been in a trading range for the most part of 2005. Now we are about 8 points away from taking out the May 2001 highs at 1315.93. If 1315.93 gets cleared and holds next week, things could get very hot on the upside. Then SPX 1388 would become the next technical expectation. It's not typical of the markets to clear such major resistances on the first attempt. So i would expect some backing and filling around these levels before we clear that resistance. Notice, the monthly CCI has broken out of the long trading range we have been in since the beginning of 2005. So we do have the momentum thrust to breakout into a large impusive move here.

Any daily close below 1295 would bring the breakout into question big time !

Tuesday, March 14, 2006

SPX buy signal at the close

The dreaded V bottom bagged the bears today.

My system issued a momentum buy signal on SPX at the close today, having being short since 3/2/06.

I mentioned a couple of days back about the Technical vs the Tactical trading. On March 10 i wrote,

On the other hand DOW issued a daily buy signal today, suggesting a "V" bottom might be in place. I don't trust the DOW and NDX daily signals for i think SPX is the proxy for the U.S markets. SPX and NDX remains on a solid sell. Remember this market is all about tactical trading. My above mentioned technical scenario may or may not work, as the whole world knows how to pick a divergent bottom, creating efficient markets, if such a scenario were to pan out. So from a tactical trading perspective, we are at the right juncture to mount an assault on the bears. There are tons of bears out there with huge stops above the SPX 1300 level. And SPX is just 15 points shy of the 1300 level. So if we were to rally and take out the 1300 level, there should some massive short covering. Also NDX is perched just below the declining tops line from 3/3/06. If we were to gap up above that trendline on Monday, a lot of trapped NDX bears could get scorched badly.

The technical expectation of a "W" bottom apparently did not occur. The tactical trading dominated once again and the dreaded "V" bottom is in place now. Look at how nicely the CCI put in a V bottom. Bottomline, i will be looking for longs going forward.

Monday, March 13, 2006

No change

SPX and NDX remains on a sell signal. DOW remains on a buy signal. There's a good chance that DOW could make new recovery highs. Will be looking for shorts tommorow..