Thursday, August 7, 2008

A Few Charts to Pay Attention To Tonight

I am going to get back to full-time posting this weekend, but I felt the need to put these two index charts up because of the important setup I see in them. I don't know if it will amount to anything, but the S&P 500 and Dow look IDENTICAL right now to what they looked like in late February before they moved much lower and tested their January lows. It is almost scary how much alike the two time periods look.

Dow
S&P 500
Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

In addition, I have been showing a few times over the last two weeks how the Market Monitor numbers I have been getting in my scans have looked very similar to the late-February time period as well. It was a very choppy several weeks back then, but the market did become overbought momentum-wise, just like it looks to be right now. Now this all might amount to nothing, but I am putting these observations out there because I think it is very possible we could be at a turning point here. Volume appears to be a little heavier today, and if it is, that will be two distribution days already for the S&P. I will be paying attention tomorrow - if we get more heavy selling, then I think this scenario may indeed play out, and I will look to get more heavily short.

Remember, we never really had perfect conditions to put in a meaningful bottom in July. The VIX hit a max of 30. The Market Monitor numbers never hit extremes. There was very little true panic selling. So perhaps we have to test those lows before establishing a real tradeable rally just like we did in March, because right now, stocks continue to act poorly (i.e. MR for today). If we move back higher tomorrow, then maybe these setups will amount to nothing. We shall see. Good luck Friday and be careful right now.

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5 comments:

Anonymous said...

I remember you saying a month ago or so that this reminds you of the situation in January. You just might have been right.

Anonymous said...

Mac, crazy day today. Take a look at the intraday chart for EURX. Was holding 18.50 pretty steady, then wham! Waterfalled to $15.75 before rebounding. Saw it back over 18 in after hours.

Scott

1option said...

Hey can you do an analysis of UBB? I am looking for the breakout of the triangle pattern.
Thanks.

Mac said...

Soctt - we've seen a lot of charts like EURX lately - VISN, MR, etc. That's one reason I am more bearish right now - if this was a healthy market, good stocks wouldn't be acting like they are.

1option - to be honest, I don't see anything either way with UBB. If you are looking to short, I think there are much better patterns in the financials that that one, and I don't see anything that makes me want to go long here. Just my opinion.

stock-trading-ideas.com said...

The biotechs and trans are still holding the fort. They might lead the market to upside...