Monday, December 3, 2007

S&P 500

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Overall my mid-term outlook is bullish.

Even if I expect a temporary pullback (continuation of the recent) I believe it should be within the current mid-term uptrend and I assume to see the indexes and all market higher.

If you read my post on November 23, 2007, you should know my main points why I was thinking about coming trend reversal. Now, when reversal occurred and we see a pullback, many traders are asking the logical question: “Is this pullback is the down-trend restoring, or this is just a correction within the dominant mid-term up-trend?”.

Basically we have to decide if the up-rally started on November 27 could be consider as a beginning of the up-trend or it was just a correction and the market will drop even deeper down.

By coming back to the S&P 500 index chart:

SP 500

Some points that make me assume in continuation of the bull market:

- The SBV advances and this is a good sign to the indexes higher;

- The MACD advances as well and it would be nice to see it run over zero line into positive territory as further up-trend confirmation;

- The Stochastics advances after crossing 20 level. This is very nice for up-trend confirmation;

- The MVO=0 shows no more high volume activity. The volume dropped and there is no more panic selling or greedy buying. After big volume surges during the price move down (red MVO indicates it) we should see up-move until we face big volume surges during the price move up (green MVO);

- The VIX volatility index declines. It would be very good to see further VIX decline as further confirmation of strong up-trend
The DJI indicators show similar picture. The NASDAQ 100 in opposite to the S&P 500 and DJI show smaller volume surges during the crash and when the S&P 500 and DJI continued to drop the NASDAQ moved flat. We still can get surprised by the NASDAQ, however as I already mentioned, based on the charts I use I believe the odds are on the bull market and I expect to see the indexes higher over the mid-term.

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