Archive for December, 2011
SPYs and Dollar Update (11-20-10)
Once again the dollar is strengthening caused by the instability of the European nations. So far this has been a good indicator of what the stock market will head because it’s been trading opposite to the US Dollar index, but this inverse relationship can change at any time. Just like there has been many times in the past where the dollar and commodities have traded in the same direction. I do have a target for the SPYs to pull back and test the down trend line made from all the way back at the highs in 2007. This will also coincide with a fib retracement from the lows made early this year to the resent highs. I will be making a video the soonest this happens of changes. The markets are in a new trend, but patients are still needed to make the best of it.
Simply a Directional Analysis
Like I mention on my last update, there is going to be a pull back. All the major news that the market was using for momentum are all in and now there runner needs a little breather. Here is what is going to be important on this pull back. 1. We need to see the volume to be lighter than the average. 2. We need to see the pull back to exhaust at or near the downtrend line formed from highs of 2007. And 3. We prefer the pull back to be fast and furious. These are the usual characteristics of bullish pull backs, this way we can see a clear view of the probabilities for an intermediate to longer term direction. I do expect most of these to be true plus some of the sectors like the financials, energy, and semiconductors to have similar moves. Those are the main sectors that would take the indices to make a real push to new highs.
Video soon to come….
And the Direction is…..(08-11-10)
Ok so we have been long enough over the down trend line now to know the trend has changed. Not only from the rules of the patterns which I was following, but the main trend indicator (the Aroon Indicator) has gone to a bullish trend on the weekly and the daily since the end of last week. What does that mean? Well first that the market is going to go higher in the intermediate to longer term, but I wouldn’t jump all in just yet. Usually when there is a trend change the market tends to pull back, and that would make sense since they complacency indicator which is the Put to Call ratios are getting over extended. Let me break it down a little more, now that the markets are making new 52 weeks highs every one that has missed this massive move from the lows in July or even August is going to want to get in the market. So the big money that has been holding this whole time (like mutual funds or Hedge funds) will be selling large quantities or block selling while the euphoria is here. Yes, believe it or not the big money will sell, not only to capture some profits but for sector rotation too. This will cause the market to have a nasty sell off to do a back test of the broken downtrend line, and when this happens that will be the opportunity to go long this new uptrend on the markets. The second scenario is that it could just consolidate in this area for a few weeks since there is been trillions of dollars standing on the sidelines waiting for the worst case scenario, a double dip recession. In that case, the technicals will also show us well in advance and it will be also a good time to make a move. The bottom line is the market has officially changed directions, but being cautious on any moves has never hurt anyone.