Sunday, April 12, 2009

Simple Technical Analysis

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I'll try do be short today. It's a Holiday.

In my last week "S&P 500 Volatility" post I have set next sensitive level market may try to reach. We may see now that the Nasdaq 100 index has broke those levels and run higher, S&P 500 index coming close and the DJI index still almost 1,000 points behind. I still consider that there is a tendency of the market to run higher. The main my argument is that during the recent recovery I witnessed that stock market ignored high volume surges to the up-move and reacted stronger on smaller volume surges to the price down side. It is one of the characteristics of the long term recovery (up-trend) when you need strong oversold indication to see small correction and even light overbought indication restores general market trend.

One one hand I am bullish in the longer-term, on the other hand it is second month when the stock market is in the recovery movement and it would not be a smart move to expect that it will be like this forever. The market will not go up without corrections. Even if my technical analysis (60-day chart I used in my previous posts) indicates higher odds of the further recovery, I'm not telling that in the next few sessions the same technical analysis could turn from bullish into bearish. If the S&P 500 and DJI indexes come to the levels where they stuck (moved flat) in December 2008, there is a possibility we may see flat market again. A lot of traders were entering position in period from the end of October 2008 until beginning of January 2009 (see 2-year DJI chart) and many of them will be in the position to make a trading decision - to keep a position opened or close it with small losses/profit. That is the reason why I call those levels sensitive.

Even the market is positive at this moment the volatility is still high and it's not a time yet when we may forget for intraday charts and take a look at them once a week.

Happy Easter to everyone.