Saturday, January 10, 2009

Weekly Update

Bob Dylan said "You don't need a weather man to tell which way the wind blows" and the 4 ETF basket study of the 3LRs suggests we've got more of the same to go. Although the RSI2 (the indicator Larry Connors calls the "holy grail") is fast approaching oversold levels, the MACD and the stochastics argue for a continued slide. So much for a "Kiss the channel goodbye", the Qs and IWM have retreated back to the LR30 mean and XLF, showing the greatest weakness of the 4, looks headed for the lower support channel band at 11.00.
The VIX rose almost 10% for the week to close at 42.82 and both the daily and weekly LR30 studies support a continued rise. Although my target of 60 looks a little unlikely, a 50-55 level certainly seems doable if things get agoing to the downside. Earnings season kicks off next week and, like a good game of liars poker, expect in inordinate amount of head fakes and countervailing trading, which should translate into a hike in the volatility.
T2100 (advance decline line) is following suit with the 4 ETF basket and adds credence to the argument for the downside.

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