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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.
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