Sunday, November 28, 2010

Dow at Fibonacci Resistance

Technically, a logical place to stop and turn back.

As the chart below shows, Dow Jones Industrial Average tried to bust through the 61.8% retracement from the March 2009 bottom back to the October 2007 market top, and failed.

Not all is lost. On the daily chart, it is sitting right on the 50-day simple moving average, which may act as a support. Personally, I don't like the way it's been trading for the past week - one big down day followed by one big up day, and then another big down day. That doesn't look like a bottom being formed; rather, it looks like a topping pattern.

It looks and feels the same - that the index is about to break down - as at the end of August. Back then, a big up day was followed by a big down day, and just about everyone was looking at the neckline of the big head and shoulders pattern. And it didn't happen. September was a big up month as the US dollar cratered.

Ben's printing (QE2) hasn't resulted in an up-market in November, contrary to what Ben said when he boldly embarked on the purchase. The only thing keeping the market from crashing (there are a plenty of reasons why Dow should be tanking 1,000 points every single day) may be the hope that Ben and the Inkjets at the Federal Reserve will deliver on their word, that QE2 will cause the stock market to go up, making everyone feel rich.

I'm watching the US dollar, which has broken out of the pattern which could be called a bullish falling wedge. The breakout coincided with the worsening of Ireland's debt problem, which is supposed to be resolved now by the $113 billion bailout.

US dollar down, stock market up. That pattern persists.

Tuesday, November 23, 2010

Louise Yamada Cautions Further Weakness

A week ago I posted that Dow was on the blink. A week later, it is still on the blink, actually almost at the same level; the index had a huge rebound 2 days after I posted (to be expected, LOL), then went nowhere for two trading days, and a big down day with good volume.

Louise Yamada, one of the best technical analysts out there, thinks the next logical support will be the August high, around 10,700 for Dow (like I said....), and that would be still considered consolidation.

However, she sounds caution that it may not hold there. The reason? Because the market failed to break out of the April high. She considers that to be more important than the lack of daily volume which many analysts (including Art Cashin) have pointed out as a bearish sign.

For more, go to Kingworld News.

(h/t erikbacardi)

Tuesday, November 16, 2010

Dow on the Blink

I am very well aware that the last post's title was "Dow to 16,000". That was right after Ben and the Inkjets announced $600 billion QE2. Things haven't changed much in the US, I don't think, but ever since it has been the "sell whatever the news is" market. The debt crisis in Ireland hasn't helped either.

Here's a 1-year daily chart of Dow. It's a simple chart with just the Bollinger band, and intermediate/long-term indicators. It stopped today at the lower Bollinger band. If this doesn't give support, the next suppot level looks like 10,700 area. The intermediate/long indicators - CCI set at 133, slow stochastics set at 89 - are signaling a potential turning point. CCI is right now 100.11. If it breaks below 100, the bull run since September may be over. The same thing with slow stochastics. It is just about to cross below 80.

I am not putting any new trade, long or short. It does not feel safe here. Instead of TA, I have been paying more attention to what's happening politically in the US and Europe.

(How can a stock market of a country where you have to allow a total stranger put his/her hands inside your pants so that you can get on an airplane go up? That's what I have been wondering since the beginning of November, and the answer so far is no it cannot.)

Thursday, November 4, 2010

Dow to 16,000! (Thank Ben)

As the deranged central bankers running amok with $110 billion per month monetization (that's what it is, even though it is done through the primary dealers - who happen to own the Fed), the sky seems to be the limit for the stock market and the commodities market.

Buy anything, it will be good for you, says the bankers.

So, let's take a look at how high Dow Jones Industrial Average can go, TA-wise. I know, I know, what's TA in the age of permanent meddling by the Fed? Well, algos used at the NY Fed may be programmed to think and act like a human trader. Their time-span is in seconds for their "long-term" holdings, that's all..

This is 5-year monthly chart of Dow. See how it is fashioned like a cup and handle? A rather pointed cup but never mind that. The index is just breaking out of the handle high. From the pattern, the target price would be:

Depth of the cup + handle high. And that computes to: 16,046.

Sometime in 2012 maybe. Ben should do QE3, 4, 5, 6, 7... to make sure it gets there. But good luck when you have to answer Ron Paul in the Finance subcommittee, Ben. You can't laugh at him like you did before, because he will be the chairman of the subcommittee...

Again, this is not an investment advice. Just for your entertainment. Laugh and be merry. A cup of Starbucks coffee may cost you $20 soon, but your 401K will increase in price (until the government decides to seize it from you by stuffing special Treasury retirement bonds...) GLTA.