I can't pretend to have answers to these questions. I can only try to model some possibilities. If you are looking for my short term levels - please read my PRIOR post concerning the hourly. If you are looking at the big picture - continue reading.
First, we must assume that this downtrend will continue. This requires that we see a continuation of lower highs and lower lows. If this is a CORRECTION, we should use the weekly chart as our guide - as a correction of the last 7 months will require several weeks. Anything less and we will have too many skeptical investors to resume a strong rally.
If we correct on the weekly, we are talking about some substantial price movement. Open the following chart where I have circled 2 possible targets for a correction.
Zone A represents a very logical zone because several technicals intersect in this region. First in line is the bottom BB - we nearly touched the top and it sure seems like we are headed for the bottom. This is a natural oscillation and it seems like we are a bit overdue! Second in line is the 20pMA. We haven't touched this line since we crossed through it in March - over 7 Months ago. Price action tends to the 20p MA after extremes. Again, we seem overdue. Finally, the center of this zone happens to be at the 50% retracement level of the the major rally leg that started at 880 and ran to 1080. This is the orange line. (I had to move the fib out to the right to allow viewing of the numbers.) Seems that a correction in the 960 to 990 range is very possible.
A more aggressive target is represented in Zone B. If we have a second panic wave in this bear market - the entire rally of the last 7 months must be tested. This will require a test of the 50% retracement - which is the swing point. This is the orange line at around 880. It also represents a full retracement of the 880-1080 rally discussed above. Finally, it aligns nicely with the 50% fib fan blade which is cast across price action as a result of the first major breakdown in the crash. If we are going to have a "W", it will start with a correction to Zone B. That is where the balance of fear and greed will be weighed!
Anyway, IF we CORRECT these are my two target zones. Looking at the Stochs and the RSI, I'd say we have plenty of room for the bottom to fall for some time to come.
13 comments:
David here we go :) again it seems,
This one does feel like the real thing , last Wed and it turn felt like it for me . ( thats not worth a cup of strong coffee , I know )
We have all seen the short term down trend line broken early over and over .
I really enjoy reading your work
Thanks for posting
Best of luck
Thanks Payline,
I appreciate your comments. Posting helps me think through the price action and prepares me for the trading day. Be sure to check my earlier post today on the hourly chart. I am very pleased with the analysis this week!
Cheers.
David O, my strategy paid of previously, it just didn't work today. I guess I should complain if I am up 5% on the week and up slightly today. I am going to modify, however, after getting burned with it twice. Don't be surprised by a horrendous counter-rally after today, imo. I'm ust not going to try to play it.
Hey KPH,
Nothing surprises me in this market anymore! My hope is that we open down in the morning - touch the 1025 level (or break it!) so I can add some more insurance options before any counter rally begins.
Keep in mind that volatility is up big time - VIX rising 12%. This is a good thing. I love big price swings - especially if they are within a downtrend.
Good luck tomorrow!
Nice Analysis David!! Always great to read!
I got to your blog from HMS's blog, and am enjoying both of them :)
Thanks MC, and welcome!
Sure, Eagerly waiting for the weekend analysis! :)
David , Is this what happened via TA?
We gaped down at the open, Came up the fill the gap , could not really breakout threw yesterdays close, to breakout to the upside.
and the 50Ma provided down side resistance.
Took two runs at the downside and four at the upside , but stayed in the trading range.
Bears could almost claim victory via late sell off , but close above 25 , made the day a draw at best.
The short term trend line is down ,
we are under the 20ma but siting on the 50ma,
Longer trend from March low would have us setting right on the line.
I am trying to get better at Ta , and hoping understanding what did happen will help , with what might
happen .
Best luck
Personally, went long pre-market on Friday, made money but got stopped out too soon. The big question is whether the market can come up with any reason to go up.
I keep hearing the date of 10/9, which could make sense to me. We could easily get one last gasp attempt. Many bears want this, but I just don't know if we are going to get it. Some similarities between now and 9/1, though.
http://3.bp.blogspot.com/_TwUS3GyHKsQ/SsalA-a3NvI/AAAAAAAACDg/QS_7DlbUVLY/s1600-h/2009-10-02-PROPHET1.png
hey david,
what is ur TA and personal opinion saying now ?
more dowside towards 990 levels or the correction is over ?
David , another question if I may ,
Is it possible that Sep 23 1080 high was the start of Wave 1 and Monday as Wave2 which would but us in the middle of wave 3 .
Am I close or just out of my mind ?
thanks
MC and Payline, nobody knows, and earnings could screw up everything. Either way. Here is one site that I like a bit:
http://slopeofhope.com/
One thing that I'll say is that Barrons is not saying a thing about our having topped out and is saying we should assume the bull is still on. That probably means we have topped out...
One thing I will say is that although they are screwed intermediate term and longer term, some financials could beat in the near term because of the recent bizarre rise in the credit markets. This is until the market starts to discount all the future problems, of course.
Hey All,
I had a very disturbing experience with my futures broker on Friday - which created some unusual anziety that took most of the weekend to work off. As a result, I opted to walk away from the analysis for a couple of days and spend some time on more important matters.
I'll try to address all the good questions in tonight's post.
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