Sunday, May 17, 2009

Weekly momentum hooks down

It's been a while i have updated this blog as i was on a business travel.

The market throws a curve ball at you right when you think you are completely in sync with the market. I was completely in tune with the market for more than a year, until this take-off from March. That's what makes the markets fascinating. I was wrong in my assesment about the size of the rally. Despite the relentlessness and the size, we could not take out the Jan 6 highs on the SPX. Something bizarre happened with the cycles. The 9 month cycle right-translated more than i thought. Both timewise and pricewise the rally overextended. But it did not change the overall trend charateristics.

Now finally the weekly momentum has hooked down on the NDX and DOW charts. SPX is hanging by a thread. The daily is uptrending on the all the three. Hourly is downtrending on all the three. What this tells me is that we have started a multi-week pullback. The question as to whether March was an IT or ST bottom will be answered in the next few weeks. If we get oversold on the weekly charts and hold above the March lows ( or put it differntly, if we do not break the March lows by end of July), the 9 month cycle would bottom above March lows, which would be IT bullish. That would mean another upleg to follow after this correction. On the other hand, if we crack the March lows, then this whole rally was another ST affair and the downtrend will reassert itself.

So in the ST, i will be shorting rallies on the hourly charts, until the weekly charts get oversold and provide more clues.