Thursday, September 24, 2009

Bear Trap Developing?

Finally the bears are having their day. When I saw majority of the stock on my watch list start to roll over during the last hour of trading yesterday, I sensed a pullback could be developing. Being a cautious trader, I pull the trigger and closed out all my longs before the close yesterday and moved to the sideline. Today, the market opened higher with a positive unemployment report. Then after 30 minutes of trading and with a negative existing home sales report, the bears took control once again and drove the market down into the red. The market attempted to rally during the last couple hours of trading, but this time the bears held their ground.

Even though the bears are in control right now, it doesn’t mean the rally is over or the 10,000 and 1,100 level for the Dow & SP500 respectively is history. To the contrary, I am watching for potential bear trap that could spring up to push the market to the 10,000 and 1,100 for the Dow & SP500 respectively. In the following charts, I have highlighted the potential zone where I will be watching for possible bear trap to develop.

Until I see technical deteriorations that accompany market reversal, I will treat this pullback as a setup for the next up leg move. Again, I will continue to be cautious since this rally is full of suspicions and it is over extended. It is like a game of musical chairs, always be prepare for the imminent stop playing of the music. I would rather sit down, get back up and look a bit silly than get caught without a chair to sit, because without a chair to sit, it’s ‘Game Over’.

Share It

Saturday, September 19, 2009

Are We There Yet?

The question being asked in the market is “Are we there yet?” Instead of “How high can it go?” Skepticism still abound on how can this market keep going up. From the inverted H&S measured move, it says there is still much higher ground to go. But for the near term, here is a pattern one might want to keep an eye on to get some intermediate term target, the “Bull Flag”. It might not be as clear to see this pattern on the daily price chart, but the weekly price chart does show this pattern a bit clearer for the DJIA, SP500, and the Nasdaq 100.

In the short term, we are coming up to the magical/psychological resistance level of 10,000 for the DJIA and 1,100 for the SP500. These psychological resistance levels could trap more bears into this buy-the-dip rally. This could be the catalyst that will force those skeptical bears to give up and go long. And that will play right into setting up the October selloff (remember Black Monday?).

Here are the weekly charts showing the bull flag and the measured move. Click on the chart to get a larger image.

For those of you that trade the Spider and the Qs, here are the charts for these two ETF showing the bull flag measured move target level.

Be careful, although September’s performance has defied those talking heads about how historically September been a bad month for the market. There still can be some surprises lurking that will turn this market upside down. Don’t get complacent! Watch those technical levels, don't forget to mention where you’ve seen them.

Share It

Monday, September 14, 2009

Crushed Again!

Just when the bears think they have control, the dip buyers came in and bull(y) the bears back to their corner. As one can see from the hourly intraday chart, the SP500 open with a gap down today.

The bears pushed it down to the 5 days SMA and the dip buyers came in and moved the market back toward the opening range high. Throughout the morning, the bulls and bears were engaged in a battle to move the market into positive territory or keep it below last week’s close. Shortly after 1:00pm, the bulls got control and moved the SP500 into positive territory and then take out last week’s high in the final hour. Once again, the bears got crushed.

Let’s take a look at the daily and the weekly chart of the SP500 and see why the bears are constantly losing the battle for control.

Looking at the daily chart, it is showing the SP500 continues to make higher high and higher low.

The SP500 is flirting with the 1044 level and the momentum favors the SP500 to test the 1044 level for support than to retrace back to previous resistance-turned-support level of 950. If it does retrace below the 1044 level, it will most likely be a shallow retracement to the 1010-1020 range.

The 1010-1020 range on the weekly chart shown to be near the 38.2% Fib retracement level from 2007 high to March 2009 low.

Since the SP500 has established itself above this Fib retracement level, the resistance turned into support scenario comes into play, thus make this a viable support level. Next major resistance level is the rounded number of 1100. From the weekly chart, 1100 just happens to be near the 50% Fib retracement level. A major pull back or a possible reversal could occur when the SP500 reached this 1100/50% Fib retracement level. But until then, the measured move from the inverted H&S pattern put the SP500 at 1250, and this level is near the 61.8% Fib retracement. Therefore, even if there is a pull back from 1100, there still can be another major upward move to 1250 before this rally comes to an end.

All these technical levels clearly show why the bears are having such a hard time to take control of this market. As the bears keep fighting these technical levels, they will keep losing the battles. As a technician, I will trade the trend identified by these technical levels until the market tell me otherwise. Will we get a major correction? You bet, when we get complacent, the market will slap us with a big selloff. Right now, there are still too many skeptics and too many cautious traders (myself included.) Therefore, there will be more upside in the near term.

Share It

Tuesday, September 8, 2009

Going Higher

There is not much new for me to say about the market’s behavior. The tune has not changed; it is still singing, “Going higher.” There is no logic to this extended rally. The market is acting out base on sentiments and technical. The market is simply pushing aside all the fundamentals and leaving them to be dealt with later. Therefore, unless you are willing to go long, then the next best thing is to do nothing. All these short quick pullbacks are frustrating and agonizing for the bears. The talking heads are warning us about how bad the month of September has been historically. But be reminded the market rarely does what the herd expects it to do. So do not be surprise this September could turn out to be not such a bad month everyone is expecting it to be. We just need to pay attention to what the market does, and let it lead us rather than for us to anticipate what it might do.

Since there is nothing new for me to say, I just let the charts do the talking. Here are the updated charts.

Share It