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Friday, July 30, 2010

Fun With Weekly Charts

Here is the chart of the SPX with absolutely no moving averages, and boy does that look nice. We got a little clarity on our current range conditions, and have retraced 50% of the move from the recent low to the recent high, bounced of it, and moved up.  That would put our "macro": pivot point at about 1085, and as long as we can stay above ot we are in pretty good shape.  The area from 1100-1105 is proving to be formidable resistance, but the market does seem to be shaping up for another breakout attempt. Volume has been relatively low on the pullback, and ATR is still dropping, bith signs of a lack of big money selling here.

While I'm not into the prediction game (although I would probably have more readers if I made outlandish predictions laced with foul language and blamed the PPT every time I was wrong), on Fridays I like to have a little fun with the weekly charts. Since the 09 bottom, I have been struck by the similarities with 2006-2007 thayt this market has had, and this correction has had a lot of similarities to the near panic of July-August 2007. We came out of that correction to have an epic rally, hit a new high on the SPX, only to roll over into one of the greatest bear markets ever. Will we do it again? I don';t know, but here is how I think it ill play out if we do. Let's take the recent January high as a pivot point, the June low as the bottom, and project a target from there. I come up with about 1290, which will probably hit about mid to late September.

The Nasdaq has a bit more lofty target here, just about 2600. It does appear to be having a little trouble with the 40 week average, but has put a pin through it and could be ready to use it as a launching pad.

The target on the Dow is about 11800, so don't go rushing out to buy Dow 12000 hats.

This is intersting. The target on the Transports is right at the April high. That fits my scenario, as the transports and the Russell 2000 should both fail to hit new highs before we nose over.

If you remember 2007, you remember that the Russell 2000 topped out in February and despite some epic rallies never hit a new high. If this follows form, it won't this time either. If it does, then my theory gets flushed, and it's all the PPT's fault.

If you are a reader of Tim Knight's blog (I have a link on my blogroll) you have seen the pictures of bars he puts up on Friday, presumably to celebrate the end of the week. I thought I would follow suit with a picture of one of my favorite drinking establishments.

Have a great weekend.

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