Thursday, October 30, 2008

Some Charts to Tell The Market's Story

Just got back from taking my son out for his second "trick or treating" - it was pretty cool seeing him go up to the doors and get the candy; I think it will be even more interesting in a few hours when all the sugar kicks in. But since my wife is taking him over to her aunt's house and I am staying back to give out candy, I figured I would put a few charts up tonight since I haven't posted too many recently due to the lack of worthy ones to post. I am not saying all of these are "worthy" but I think they give a good idea of where we are at in this market.

With all of the damage done done to the major indices during October, many charts were destroyed and it will take a lot of time for many of them to repair their damage. Recently, I have seen a few charts pop up that look decent and today a few of those brokeout. Unfortunately, I am literally posting all of the ones I am seeing below. I really wish there were more. This first group need to rest or pullback before buying as I would certainly not chase breakout in this environment.


This second group of charts are what I am watching setting up. I again wish there were more and unfortunately, most of the few I see have major flaws that prevent me from getting too excited. I will continue to watch them and see what happens.


Airlines seem to be near the top of low-level bases, but with their 200 day moving averages still under their 50 day moving averages, along with sub-par fundamentals, I don't know that these are stocks I want to jump into on the long side. That is my IBD-side talking.


Oil stocks have put in nice bounces over the past two weeks after being crushed, but now many are approaching key areas that may be turning points on these bounces. Based on what I see, I am leaning more to look at these as possible shorts instead of playing them as possible breakouts, but I am not discounting further price appreciation.


Speaking of shorts, I saw some nice setups pop-up in my scans tonight as these stocks have rallied right into key resistance levels. I can't say for sure that I will take any of these, but these are fairly low-risk as long as you use a stop loss above the resistance levels highlighted below. That's assuming we don't have another huge gap up or down tomorrow which is one reason trading is so tough right now - good entries are hard to find.

All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Going back to the title of this post, the charts tell me that I should be slightly more bullish than I have been recently and should be willing to give the market a chance to prove itself to me. That being said, every time I have thought this way the past few months, the market has shoved it right back in my face. I hope this time is different and we can get something productive going to the upside. However, I am not taking anything for granted however and will try to be prepared for a rally or further pullback - hence the possible shorts. As I said in my first post, ideally we rest here for another few days or more, which may allow some charts to tighten up. We shall see - how often has this market cooperated recently. Good luck Friday.

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