Monday, August 11, 2008

Nasdaq Right At Key Technical Levels

I wanted to put this chart up intraday. Technically, the market is at a very important point right here. The Nasdaq is trying to get above the longer-term downtrend line for this bear market and above its 200 day moving average as well. A break above this area could potentially mark a longer-term trend change. This could also be a logical location for this rally to stop and reverse.

Chart from Telechart2007, Courtesy of Worden Brothers, Inc.

I have done nothing today and am still 100% in cash. I just can't make myself buy anything here. Perhaps I will regret this in a major way. If I am wrong here, this won't be the first time. But I still feel that buying here is very risky. Why? Look at the picture below.

This is directly from my Telechart scans taken intraday today. There are currently around 130 stocks that have made a 50% or higher move in the last 20 trading days. Think about that for a second. That is crazy and unsustainable. A normal extended reading on this scan is between 20-30. I have seen the number get as high as 50 a few times. We are way beyond that right now. We are either in the process of a major bottom in the market, or we are setting up for a major pullback. If this was a major bottom, I think volume would be higher over the past week instead of dying off, and that there would be more IBD-quality stocks breaking out. There have been a few, but most of the movers have been the beaten down stocks.

If nothing else, this market is due for a pullback and due for one very soon. I have no idea when it will happen, but that's why I can't buy here. It is too risky in my opinion. If we pullback quietly and calmly soon, and some of these stocks that have run too fast can rest bullishly, then maybe then I will look to buy. Right now, I am sitting on my hands and contemplating testing a few shorts out again. Good luck.



Anonymous said...

Thank you. I always wait your posts and you never disapointed.

Mac said...

Thanks for the kind words. I try my best, but I can never promise anything via the advice I give. Just putting my thoughts out there about what I see.