Friday, August 24, 2007

Qs Jack-in-the-Box

The Qs showed surprising strength today, climbing to close at the daily high and at intermediate resistance. The Qs also closed at the 50 DSMA, a new 12 day high and at the MACD zero line. The fact that this was accomplished on the lowest volume in 30 days (88M) is not the only cause for concern.
The VIX continued its descent, now approaching the lower band and pushing through the MACD zero line. The RSI is flashing a solid oversold signal after today's action and , typically, we would expect a retracement (bounce up) at this level.
For those who are familiar with the Stock Traders Almanac, I note that they mention August 31st as the close of the shortest bear market in history which lasted 45 days and ended 8/31/98 after the S&P recovered from a 19.3% decline. If the market can sustain its current recovery, we may beat that record next week, however, Labor Day is typically a time for market volatility with next Thursday expected as a major threat, being up only once in the last 10 years. It will be interesting to see how the market sets up next week prior to the extended weekend.

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