Wednesday, February 13, 2008

Bottoming or bull trap?

Some interesting developments today. The Qs have have reached the 44.80 resistance level that I suggested in Saturday's post. So now what?
The upper 4 chart daily study of the Qs, IWM. SPY and DIA shows all 4 indices breaking out (to the upside) of the LR30 channel upper band. At the same time, virtually all the technical indicators are upslope (bullish), although most are rapidly approaching overbought levels (bearish). Although the TICK PP pivot today was 276, the TICK spent more time below the pivot than above it. In addition, the NYAD hung right on the PP pivot for the last 4 hours of the session, suggesting that buying breadth was not particularly enthusiastic. With the markets closed Monday, it will be interesting to see if the longs can sustain strength into Friday's close and a 3 day weekend.
My overall market view is still bearish, as I see more emerging short setups than long setups.
If we do get renewed buying Thursday and Friday morning, the next resistance level is a buck away at 45.75 . . . at which time the Qs will be significantly overbought.
Nice little reality check from Phil today on the mortgage bailout plan. Check out the right side of Phil's site for some insights into potential XLF trades.

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