Thursday April 21, 2011
We had it right this weekend that the market would roll over. We failed to anticipate such a quick, violent reversal. Here is the bigger picture on how Mr. Market changed his mind in 48 hours. It was not because of Intel earnings.
This is a two year chart of the NYSE Summation Index. If I had backed off past last June in the weekend analysis, this triangle formation would have been much more obvious. This explains why the market did not get to the 400 support level I mentioned. Look closely and the pink uptrend line is above 400 and that is where the market found support and bounced yesterday.
As we get closer to the end of the triangle the trade grows more and more frantic over the eventual up or down resolution. And so the market like a 1950s mechanical pin ball game, bangs back and forth between the lower support and upper resistance. The truth is that it has no progress has been made since the February high at SP 1339.
The up move yesterday generated a daily buy signal on our parabolic indicator. It would appear that there is enough volume to break through and close over the 1340 resistance area. When that happens the market should be on its way to the final high anticipated for June.
TLT retreated yesterday on the big stock move, it may be that we need to purchase some TBT or take some profits here. A rocket launch in stocks will not doubt drain money from bonds.
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