The first blatant crack in this bear-market rally occurred today on the New York Stock Exchange (NYSE) Index. The NYSE had been in a neutral symmetrical-triangle pattern, and I had been watching it to see if it would improve into an ascending-triangle as the rally proceeded, but today it did just the opposite. Notice how it decisively broke the lower purple line of the pattern (click to enlarge):
So, now I must downgrade the NYSE to a bearish descending-triangle:
If the NYSE breaks below the lower purple line of this descending-triangle pattern, it can be expected to move below the July low. Of course, much of this rally has taken place in NASDAQ stocks, but it is unlikely that the two indexes will continue to move in opposite directions for long.
Good interpretation. I agree.
I’m thinking of adding another 1.5 % to qid each of Tuesday and Wednesday, maybe splitting the add in halves, morning and afternoon. Not sure if I’ll only do this if the qid is < 40 or just do it anyway.
Current allo is 6 % to qid
I am just short so I don’t have much contribution, but
will it not be difficult for markets to rally with Phoney and Fraudy collapsing (daily news) over the next 90 days?
Matt,
Here’s some irony: the NYSE has moved from a neutral pattern to a bearish pattern, but now the line of support is lower, so they can actually drop farther and still maintain the rally!
Larry,
The GSE’s are so low that some people are still under the illusion that they can’t go lower. They will probably bounce between $5-$15 until their fate is finallized (nationalization?).
I hope we get a nice rally to 1295 on heavy volume tomorrow. That would be a nice setup. Actually, heavy volume of any kind would be a nice change.
In terms of XLF, keep in mind BAC’s dividend ($.64/quarter) is providing support until Sep 5, altough they are just one company. Also, I think that trying to weasel out of CW’s debt is going to come back to haunt them. They are already being sued, as you probably know.
http://www.marketoracle.co.uk/Article5781.html
They will probably lose (in a year or two…) and have to immediately pay all of the bond holders, whereas otherwise they could have paid the debt gradually over 30 years. Serves them right.
Hello all
I have reading this blog for a few months now and found it extremely interesting and useful. Congratulations to Matt for producing such an interesting forum and my thanks to the valuable contributions made by several commentators.
I thought I would try and contribute (however little, or insignificant, it may be) to the debate too rather than just watching.
Paul, You mentioned the pull-back on April 11 and cautioned that yesterday’s pullback may also still be part of an uptrend. I think the SPY rally from March 17 low occured with a positive Macd divergence commencing from the earlier January 23 low (daily chart) implying greater strength for the rally from March (ie pull-back of April 11 was suspect) than the rally we have had from the July low (it had no positive divergence). Further if one looks at the SPX daily with candlestick bars an interesting pattern is displayed by the current rally: From July 15, the next 6 days provided a strong rally; we then sold off for 3 days, rallied strongly for 2 and more or less repeated this till the peak on August 11 at 1312. Since then the rally has not managed to even get back to the close on that day (1305). This, to me, is showing a weakening in the resolve of the bulls to maintain, or drive higher, the market at/from these levels. What do you think?
Another interesting candlestick pattern is shown on the daily chart for Nasdaq comp. The formation is regarded as a sign of a top (evening star – I think) but confirmation is needed today (ie lower high and lower low). If one looks at AAPL, which has been very strong of late, it too is now showing signs of correcting – adding fuel to the COMP’s fire. This, together with the above, makes me think that the current rally will not last long and indeed may even have ended.
Larry, Hi
You will find the below link interesting:
http://news.bbc.co.uk/2/hi/business/7569903.stm
“US Bank to fail within months” is not a headline to cheer the markets!
Welcome to Matt’s blog Alex. The name of the game for next 12 mths is to keep my job, contribute to my company taking advantage of the downturn and personally make some money shorting this global credit wreck.
Seems like you know the technicals. I am green in that area. Stay focused and don’t be too short-term, especially when this bear rally ends.
Hi Alex,
I’m glad that you like my blog. You made some good calls this morning. Keep them coming.
Matt