Saturday, April 12, 2008

IT update

In my last IT update on March 24, i noted that the turn in the Weekly CCI above -100 would take us to SPX 1390, the mid-line of the weekly bollinger bands. We tagged the weekly BB which came in around SPX 1386 and got rejected. Feels good as a technical analyst. But the fly in the ointment is that the NYSE MCO spike has not yet displayed negative divergences to call that SPX 1386 as a good top. Also the daily trend as evidenced by the series of higher lows on the daily charts is up. So i would expect another rally here into the SPX 1400-1420 area to finally create the necessary divergences on the MCO and set the stage for the next big decline into the SPX 1160 area.

SPX remains in a very complex corrective wave B correction. This pattern can take myriad of ways to its completion. The wave pattern by itself is totally useless to determine its conclusion. One need to look at the daily price momentum and the internals like the MCOs to determine it's conclusion.

In the end, "Price is king". If we break the 3/31/08 lows, then you can kiss the uptrend a goodbye and start looking to short rallies. For now, the ST remains up and i will be looking to buy dips on oversold conditions. ES could fill the gap at 1321.50, before we begin the next upleg. Or we could also gap-up on Monday and never look back until SPX 1400-20. Either way, i am expecting another upleg.

Good luck all !