Sunday, March 21, 2010

Technical Analysis

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In my previous post (see "High Volume and Volatility" post on March 14, 2010) I mentioned that the market is predisposed to the correction and that I expect to see some side-way trading with preference of staying in cash. Over the last five trading sessions (a week) we saw some up-move with a decline on Friday. At the end of the week, the indexes are about 1% higher from the previous week close. Some may consider it as side-way trading, some may consider it as continuation of up-trend. I would continue to stay on the same position I was a week ago: I would prefer to stay in cash. On such overbought indexes I think it would be too risky to trade "Long" and 1% of gain over five day does not worth a risk. At the same time it could be a little bit early to open a short position.

My position of "staying in cash" is based on the same technical indicators I mentioned a week ago: strong bullish accumulation (result of positive money flow since beginning of February 2010), High volume surges during the price up-move and some increase in volatility. All of this suggests the market (based on the S&P 500, DJI and Nasdaq 100 indexes) is predisposed to the movement down.

Overall technical analysis became more bearish over the last week, mainly because of the Friday's decline. Many technical indicators started to show bearish signs. Yet, I would not disregard high volume during the Friday's decline. This volume may push indexes back to the most recent highs. On the other hand this decline may grow into correction down.

I know that my posts sometimes could look confusing. On very rare occasion I clearly state my view on the possible future trend. However, if you have at least some knowledge in the art of technical analysis I think you can get some of my ideas, compare my technical analysis with yours and maybe find a correct answer. If you are looking for a straightforward opinion and straightforward signals, I am sorry, this blog is not for you. In this case I would recommend going to payable services and get some auto-trading advices.

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