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Tuesday, June 23, 2009

Bulls Need to Close above 50/200 DMA

The "golden cross" has occurred on the S&P500. The 50 DMA at 899.33 has crossed the 200 at 899.02. Two problems with the setup though: 1) The market is trading below both and they are acting more as resistance. 2) The 200DMA is sloping down (that cannot be helped at this point).

So I certainly recognize that the setup is far from ideal. All I am suggesting is that it is worth noting as every other trader and fund manager in the land will also have noted. The NASDAQ had its cross a few weeks ago. The DOW is lagging and has some serious work cut out for it to have a crossover moment. So the market is certainly fractured on this TA event, which in itself is bearish.

The key thing for the bulls today would be to close above both after they have crossed. That would be a first step in repairing the bear rally.

The second step down the road would be to have a 90% up day while above the golden cross.

So in simpler TA terms, that is what has to happen for P2 to make a final run to a new price high if it is to be.

Will it happen? I lean obviously toward one last upside surprise and that P2 is not over. But I am certainly not married to that idea. I am just waiting for the wave evidence to continue to pile up to support one side or another.

Another 90% down day while the market is under this golden cross will certainly help drive the 50 DMA back under the 200DMA so it would be a false cross.

So one more 90% down day would be very bad for the market indeed. Indeed P2 itself.

4 comments:

  1. Hi Dan,

    Can you please give me your opinion on two similar charts: Shanky's on his blog today and Schweizer's on StockTock Social, called "Time is running out"?

    Both show a top channel trendline that would suggest that 956 will not be exceeded, and the implication is that P3 has begun.

    Schweizer goes so far as to say that P5 and Supercycle C must end in about a year (July 2010) -- which makes sense from the chart, but which doesn't make sense to my overall sense!

    What do you think about these 2 charts, P3 having started, and a July 2010 finish to the bear market? Thanks.

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  2. Hi Dan,

    Good call with the [v]=[i]=888.35

    On Friday I read this on Reuters:

    "The divergence between the CBOE Volatility Index .VIX, the actual
    volatility levels for the underlying S&P 500 index .SPX and VIX futures
    remains relatively wide, said Larry McMillan, president of McMillan Analysis
    Corp in a note. "This will either be resolved via an increase in actual price
    volatility (most likely on a move to the 880 level in SPX): or alternatively,
    the trading range will maintain its integrity and the VIX and VIX futures will
    converge towards actual volatility levels," he said."

    I'm not too clued up with how the VIX works with respect to market movements but is there any credence in what is being said above that the market needs this pullback to align the VIX and then resume it's uptrend?

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  3. Market goes up tomorrow and stall @ 905 around 1:59pm.. Bernake (Crook) speaks some Chit and market tanks to 880 area...Good Night

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  4. we have had about 18 months of down market and on aug 17 about 6 moths (5 1/2) moths up.

    during the 1929 depression the longest wave was 5 months and that would put us at aug 2.

    however with all of the bank secondaries that were bought by goldman and others those shares have to be distributed to the lemming 401k folks. for this to happen puts the monthly people as they are paid for july - july contributions to be invested before aug 17 and then kaboom. just a thought.

    ReplyDelete