Tuesday, November 3, 2009
Several SHORT TERM Bullish Indicators Occured Today for the Stock Market
Today's action setup a short term bullish correction for the short term. I want to be clear that the larger trend is down and I strongly feel a large wave 3 or C is underway, which essentially is a large "crash" that will occur over several months with an ultimate target of at least the 500s for the S&P. For now, the 1101 S&P cash level should remain intact for a long long time. Today I'm merely presenting the facts as I see them which suggest a short term bullish move for the market for the coming days. Here are the bullish bullet points:
1) the VIX made a daily close beneath the upper bollinger band which concludes the buy signal (see chart attached). The last 3 times this occured, the market bottomed and rally to new daily highs. However I don't feel it will make it that far this time.
2) the Russell 2000 and Nasdaqs were stronger today and made new highs all day where the S&P and Dow struggled a bit to do so (the Dow was dragged down by Intel).
3) also, the daily Russell 2000 chart sports 5 waves down and then a bullish reversal candlestick formation (see attached chart). This suggests a corrective rally coming.
4) S&P and NYSE internals were pretty bearish this morning but flipped to be solidly bullish by the close. Nothing impressive, but it defintely showed the volume was coming in to the upside when the market rallied later in the day.
5) the dollar rallied nicely all last night into this morning but then reversed and is now forming a daily bearish reversal candlestick (see attached chart). The projection is that it's in a wave (iii) of 3 which is very bullish. So if the dollar doesn't accelerate its rally soon, something else is unfolding. The Fed announcement tomorrrow MAY do that. But right now, the dollar looks at least short term bearish which coincides with the bullish outlook for stocks in the short term.
6) tomorrow is the Fed announcement, and October's unemployment data comes out Friday. Both the Fed and unemployment announcements over the past several months have brought rallies to the stock market, no matter what the news was. This may not be the case anymore because the larger trend has changed to down, but until the market proves it's not true anymore we will assume that it is true.
7) lastly, many indices made inverse head and shoulders patterns (see S&P cash chart). As many of you know, an inverse head and shoulders pattern after a decline is a bottoming structure.
So lots of bullish action occured today which makes me conclude that the market has some bullish potential in the coming days. But I made no trades today and remain fully short, because I know that if the trend is down then surprises will be to the downside.