Los mercados en tus manos / Markets close enough to touch

BroadMarket

The first supports, holding

lunes, 18 de mayo de 2009 by Luis



The last week began with falls and ended the same way, but the most important supports have not been broken yet. This increases the possibilities for a short-term rebound. The last week minimum area in the S & P 500 is vital and it could test the low levels of 850 and 800 before there is a rebound or at least the fall stops, momentarily. We keep the final projection of the movement to levels around 750 points on the S & P 500.

This first chart shows how the fall paused momentarily when it touched the base of the upward channel, which is holding the last upward momentum since early April, as well as the different levels to project the current movement to lows.
If there is a rebound, we should be alert to the 905 level, although it could go up until 911. If exceeds this level, we should close shorts because the market could go to seek new highs. It's just a warning, this last scenario is unlikely to be met given the current state of the short term indicators, but it is useful the comment anyway.
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Thus, as for indicators of broad market, we have the McClellan Oscillator in the negative area (advance / decline and volume), and also NYSE, Nasdaq and the Continuous Market. There is no oversold, but last week we discussed the status of McClellan Sumation Index of these market considering the present situation, which is in accordance with upward trends. Precisely, that’s is why I fear that the McClellan Oscillator is also going to behave in accordance with the situation at very high readings and therefore will be useless in the coming weeks. I think we will be moving alternately between the positive and the negative zone at random and therefore it will not be a clear reference to allow a proper monitoring of the trend for a considerable period of time. It is normal that after seeing a "Breadth Thrust" (“push amplitude”) on the NYSE, it will take time to see the Sumation Index in negative field again.
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With this situation in the McClellan Oscillator and considering the behavior that is having the Put / Call Ratio, we have no choice but to resort to the volatility and volume to try to anticipate market movements. In this respect, has been striking the behavior of the VIX this week, since the last Thursday it registered a sharp drop in reaction to a small rebound in the S & P 500, although the reading of the ratio is back again on the volatility side and dangerously very close to the positive area. In these circumstances and considering the readings of the McClellan Oscillator and Nyse Volume Total Volume Ratio, is normal to have a bearish week in the markets, and could even occur a paradox in the coming weeks: see the S & P 500 and the rest of the major indices approaching (and even in some cases exceeding) the minimum levels in March, with the Sumation Index on the heights. This would be the final confirmation of the sharp handling currently in the markets.
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