It's off and rolling for this week's review. A pending rate cut on a weaking dollar should be good for commodities; but how will our Stockchart.com ers see it?
Yong Pan has seen an increasing number of neutral readings in breadth indicators having moved away from previously bullish positions. This is inevitable as part of a rally, but it leaves the market vulnerable on weakness.
I like the possibility of a bullish triangle in the SPY, but the downside target cannot be ignored if instead a rising wedge plays out:
Maurice Walker sees the rally in "good standing", with the backtest of the head-and-shoulder reversal pattern complete.
Maurice pins his colours to the mast:
Right now there is descension in the ranks of the bull camp. There is more than one doubting Thomas who was previously in the bullish camp, who is refuting the bullish portrait that has been painted here. But I for one am a believer! The bulls announced their arrival very boldly when they penetrated the downward intermediate trendline. Left unfettered and unshackled, the bulls have caused prices to make an abrupt U-turn, and I don't think the bulls should lose heart so quickly attempting to wrap a blanket indictment around this rally. This rally is innocent until proven guilty!
Some of these so-called weak-kneed bulls, claim this rally is crumbling, as they are so quick to throw this rally under the bus. But every technical indication that I'm seeing right now, shows that the bulls appetite is growing. They continue to dine on a feast of accumulation. And those bulls, who are now waving the white flag of surrender here, are doing so prematurely on this retest battlefield. Because no technical violations have yet to transpired. I think the three white candlestick pattens, that lead this open revolt against the bears will continue to go on conquering, liberating price action to advance in what I call the renegade rally.
The weekly charts continue to have rising histograms which is bullish. I am watching to see if that allows the weekly MACDs to get a bullish cross in the near future. We are also watching the weekly RSIs for a bottom failure swing (see S&P 500 weekly page 2). So far the weekly RSI is wandering aimless sideways, unable to decisive spring above the previous peak that separates the two trough lows on the RSI. But should the RSI rise above that point, prices will skyrocket.
the VIX 60-minute chart continues to for a bearish head and shoulders top. If it breaks down below 44, then we will see the double top on the VIX daily chart play out. This will bring about a massive rally, and that is why I believe that we are ready for blast off. But once resistance is tagged, it will be time to abandon ship as the right shoulders form on the daily charts.
With the new trendline I drew on the DJIA hourly chart, the H & S pattern now measures 1708 points, which could take the Dow well above the 10 K mark. That would allow inverse head and shoulders patterns to set up on the daily charts. I continue to believe that prices have already broken out of the starting gate, and will race up very quickly to resistance on the daily charts. These thoroughbred prices will trot up to resistance like never before, as the Dow, S&P 500, Russell and Nasdaq dash towards the finish line in order for a photo finish. And the bulls that placed bets on this Kentucky Derby of a market, will be in the winners circle with a reef around their head.
By the way, we dub it a 'handle' because it resembles the handle of a tea cup.
I continue to play the long side holding the proshares: DDM, SSO, QLD, UWM.
12/13 -- What we now know is that the short term uptrends changed to a flatter slope this week, with two exceptions. The Naz and QQQQ thus far held to their original slopes (and gave us perfect bounces off the lower lines on Friday). There are seasonal influences that usually prop up the small caps more than large caps in Dec-Jan, so that may be what's going on, but both these indexes also have the lower peak in the channel that led the others to break to a flatter angle, and that could still happen on the Naz and QQQQ as well.
The weakness that brought the short term charts down to support or broke them to flatter angles also brought the breakouts on the longer term charts back down for a retest of the breakout lines. At least one (XLF) is now questionable, though the others have successfully retested thus far.
So...we're heading up, but its more likely we're seeing an end-of-year tailwind than any kind of all-clear signal. Personally, I'm using this rally to get back to cash right now, as 2009 will not be a picnic.
by Declan Fallon (Fallond Stock Picks)