sexta-feira, 6 de março de 2009

Bouncing Downhill in the Technical Landscape

Bouncing Downhill in the Technical Landscape
Greg Collins March 6, 2009, 2:00 pm

In the last Quick Market Note, we highlighted the inverted cup-and-handle formation on the S&P 500 with a stochastic divergence. We noted the potential for a measured move upon breaking the neckline that could send the index toward the 664 area.

As we approach that level, we wanted to take a moment to review the current technical landscape. In our opinion, the short-term sentiment is overly negative, and is setting up the potential for a slight bounce in this area upon completing the aforementioned measured move.

Where could that bounce take us if it were to play out? See the 60-minute chart below. We have a short-term downtrend as outlined, which is the first area the markets need to get through. From there, we have a few gaps following the recent carnage. And of course, the neckline near -800 should offer formidable resistance (should we even get there).

To be clear, in the big picture we remain extremely cautious, as there's a great deal of technical damage that will take a long, long time to repair as we work off extreme speculative and credit-driven excess.

As we also discussed, breaking the 770 level on the S&P violated the 2002 market lows (akin to a trap door), equating potentially to only the second secular bear market in history. This has also sent the markets into what we have termed “the abyss.” ... Read entire article

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