Likely Targets

Thursday Aug 25, 2011

The market lows are in for the time being. It is dangerous to be wedded to a number but we are in an overall bear market environment, this is not 1995 again. 

So what is realistic?

SPY

In the bottom panel on balance volume is bouncing, attempting to turn up, so our rally has some legs.

Above that panel MACD is doing the same. Note the blue line there is a moving average we added. See the sell signal in late July when MACD broke that EMA?

In the main panel the max re tracement would be the 1250 area, the old lows in June become the new resistance on the way up. 

VIX closed at 35.9 on Wed, it will need to come below 20 before we need to worry about topping action. Other indicators like % over MAs are moving up nicely. 

Here is a suggested 'Master Indicator Screen' for market timing

Here are a series of indicators that we can use to judge the extent of topping or bottoming action. 

At top the VIX is retreating form its maximum fear level. It needs to pull back below 20. 

In the main panel, TLT is the red black bars. This govt bond fund is also a fear indicator. Investors rush to buy bonds when stocks collapse. As money has moved into stock. TLT collapsed 2.84% yesterday, we sold our remaining TLT just under 110. 

The green line is the SPX stock index. It is rising as VIX, TLT fall. 

At bottom the MACD indicator for TLT is curling over and turning down. So we have

VIX, TLT, MACD for TLT all in retreat. We should start placing orders to re purchase TLT at the old break out level of 96 and below. Old tops become new support, the reverse of the first chart with now resistance at 1250. 

thanks for reading TMP!

SPX turning up, a nice indicator window.

 

Comments

[John Burke]

Ah, I think you called the bottom a little early. The fifth wave you talked about in earlier posts is still unfolding according to EW analysis, and partially confirmed by market action today.

[Laura]

"See the sell signal in late July when MACD broke that EMA?" what is the "sell signal"? Laura (acct 1230p)

[Dennis Elam]

In the middle panel the blue line is the Exponential moving average, once the black line of the MACD dropped through the EMA, the price of SPY began its waterfall descent.