It Did Not Disappoint

From my previous post, I have indicated the Dow Jones Transportation index told us the Dow Jones Industrial will move to its January 2009 high, and true to its form, the DJIA did not disappoint those Dow Theory watchers. Not only it has reached the January 2009 high, the DJIA surpassed it and moved to the bull flag measured move level of 10,800 intraday on Friday.

DJIA:




With the quadruple witching away, now the focus will be back to watching the price actions and listening to what the market has to say. The three primary sectors I am monitoring for signs on where the market is heading are; financial, energy, and the technology. The latest price actions from the XLF, XLE, and XLK, ETF for the financial, energy, and technology respectively are telling me a pullback is on its way. These ETFs along with many stocks have reached their price target level and started to weaken.

XLF:



XLE:



XLK:



Does this pullback signal the end of the rally? From the noise in the market about 1250 for the SP500, I doubt this pullback will put an end to this rally. If you have been following this blog for a while, you would have known this 1250 level is the measured move of the inverted head & shoulder pattern formed last year. Having many traders talking about this 1250 level, this level has become a target (we know what happen to targets…they get hit.)

SP500:



Before the SP500 will make a move toward this 1250 level, it has to complete the pullback it has started last week. The level of support for the SP500 in the near term is the 1115-1130. Look for this level to show some reactions. If it fails to find support at this level, then look for next potential support near 1085. For the near term, a lot of profits need to be shaken out. Therefore, I am taking the short side.