Tuesday Nov 1, 2011
Stocks pulled back on lighter volume to test the breakout from the three month trading range.
Investors acted quickly, as fear is still high. TLT, a long dated bond fund, quickly jumped over four points.
As long as there is this much fear and caution, a great decline is a ways off.
SPX
The red green resistance line marks the top of the recent lower range. At bottom note volume was a good deal lower than on the move up last Thursday. Would a pull back to 1200-1225 constitute the Wave B we have been looking for?
NYSE Bullish Percent
The October rally was truly stunning. Bullish Percent moved from less than 20 to over 60. This sort of thing is typical of the ferocious rallies of the 1930s and other bear markets. This overbought short term status of course led to the pullback yesterday. MF Global crashed just as New Jersey and his marriage did previously. Point being, there is a track record for Jon Corrizine here. AS we noted there were numerous articles suggesting there really is no deal in Europe and those fears surfaced again. But fear remains high.
TLT VIX UUP
These three indicators, from the top, Bonds, VIX, the US Dollar, did the reverse of Chart One. While stocks pulled back to test their break out, these pulled up to re test the bottom of their previous ranges.
Europe is down 2-4% this morning with a lower opening expected for US Stocks. Expect some more backing and filling as the overbought condition is worked off.
We have seen the high for the year dating back on May of 2011. The DOW was at 12807. Recently in early October the DOW saw a rally from the lows of October 3, 2011. The Dow was @ 10623 and rallied to a high of 12272. That was a 1649 point rally. Since it broke to the upside from its trading range everybody expects the DOW to rally into a new high for the year. This is only a Bear market rally define by the Dow Theory as “secondary moves tend to be faster and sharper than the preceding primary trend.”Since the primary trend which is down took five months from high to low and it took one month to gain 1649 points that qualifies it as a secondary move. The market tends to fool the greatest amount of traders it can so it’s only logical to break to the upside to get more investors in the market since back in October everybody was talking about how the bear had arrived. The market perform one last gasp up before everybody knows that we are truly in a bear market and the trend is definitely down for some time to come. If you want to know more about the Dow Theory go to this web site: http://stockcharts.com/school/doku.php?id=chart_school:market_analysis:dow_theory
Predication time: The Dow will revisit 10623 before the end of the year and if that supports does not hold then it can go all the way to 10000 points in the Dow. So by year’s end the Dow will be between 10000 – 10623 points.
Posted by: Valentin Tristan Jr. | November 02, 2011 at 10:09 PM