So, all the bears are back out again calling for a top. Let's all take a step back and take this for what it is. Italy's bond yields are blowing out but they have been doing that for a week. We've all been talking about it. It is not like that is new news. One has to understand that the market has moved basically in one direction for the last month and corrections are normal. If one is also to look at March 08- May 08, as I continue to reference, there were several sharpish corrections but they were followed by higher highs. The final high in March formed a bearish divergence on MACD. The market made a higher high but MACD made a lower high. This is one of two set up that would be worth watching for. If the market is not to make a higher high then one should at least look for RSI to make a higher high as the market makes a lower high. That would be quite bearish as the market would be more overbought on RSI but price does not confirm. Lastly, when the market touches or breaks through the Bollinger Band for the first time, it will often correct to the middle of the Bollinger Band and then retest the top of it again. At 1292, we touched it. The market has since corrected toward the middle. A push back toward the top would be normal and a better signal if confirmed by a divergence when retesting. None of the above has happened yet, so I would keep a cool head here and take this for what it is....A CORRECTION.
One last note, the DJIA is also below and the 50 day ema and 200 day ema are both in the area of the 50% retrace. For SPX that level is 1222. That is where I will consider getting longer. All three in the same area makes for a powerful support level.
2008 as a reference
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&st=2008-03-03&en=2008-06-02&id=p57933942160&a=248174651&r=6447&cmd=print
Today (ignore all the lines and just focus not he the market pattern, oscillators and Bollinger Band)
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=8&dy=0&id=p98792950605&a=243753337&r=1710&cmd=print
DJIA
http://stockcharts.com/h-sc/ui?s=$INDU&p=D&yr=0&mn=11&dy=0&id=p79409412437&a=241463348&r=8637&cmd=print
Great post Valunvstr. I like to apply elliott wave theory to the markets and I would tend to believe that this is an ABC correction before some sort of third wave. Perhaps it is silly to suggest but I think a large upward move over the next few days is in order. Time will tell.
ReplyDelete-Metallic
Great observation ! But in the process, they are killing everyone. Thanks for your time and input.
ReplyDeleteKilling everyone. One needs to step back and look at the big picture. This is a stock market that has risen from 1074 to 1292 in the blink of an eye. If invested in appropriately, while it does not feel good, an investors should not feel as if this correction was killing anyone. Remember, the weekly oscillators (MFI, RSI) AND daily oscillators (MFI, RSI AND MACD) all gave buy signals at 1074. Stick to the plan and an investor won't feel like they are getting killed. Leave that to those that follow the emotions of the day and watch too much CNBC.
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