Monday, July 21, 2008

Short Technical Analysis

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Yesterday in my "DJI" post I have described 3 possible ways of a further trend developing over the short-term. I stated that personally I believed in higher possibly of the third scenario by which the stock market after a flat move may react on the high volume surges generated on July 17-18, 2008 and start to move down in order to retest the most recent lows (July 15 lows) - today we faced relatively flat market and it confirms my statement. Those high volume surges during the price advance did halted and stopped the recovery.

Again, I have repeat myself, my strong opinion is that the chart should be analyzed on daily basis. By monitoring the 60-day chart, today, on all three indexes (DJI, Nasdaq 100 and S&P 500) I see that McClellan Oscillator moved even lower down into negative territory by overcrossing zero line. Stochastics and RSI started to move down and dropped below 80 and 70 levels respectively. SBV started to decline as well. All of that tell me that most likely I may see further development of the third scenario and now I consider that the odds are on a move down.

I do not know know how deep the market may drop (if it's going to drop at all) - it could crash only a few points or it could run to July 15 lows and even lower. If the indexes move down, I would expect to see high volume again. Then, depending on a magnitude of that volume it would be easier to judge when we may see reversal. That's why I have one recommendation only: "Do your homework" - analyze charts on the daily basis.

Of course my technical analysis could be wrong and market still may ignore July 17-18 high volume and continue to move up.

My view on the 1-year chart is still the same as before (see my previous posts).