Monday, September 13, 2010
Above is a daily chart of the Dow showing the range it's trading in which I'm sure the overwhelming majority of you are well aware of. I put this up here because I think the market is going to try and fake out the masses somewhere near the top end of the range here. This range has been mentioned over and over and over again in financial media so it's getting quite old and obvious at this point. So I can't imagine the 1130 S&P level offering much of a reversal point for any significant pullback. It is the level of the last high though, so a minor pullback may occur there, but a sustained decline I doubt. It's just too obvious.
Rather I expect the market to either decline near current levels, quite shy of that upper channel line, or it will top and reverse after a strong break above that trendline. Either move would fool most people in my view: if it tops and reverses prior to the top end of the channel a lot of folks will miss the move and might remain bullish and continue buying dips or just rush to sell everything since they believe they missed the top. Both behaviors I feel would be important to sustain a nice long healthy decline; and if the market rallies above that upper trendline, it may suck in the remaining bulls into the market to finally get sentiment at such a bullish extreme to where the market tops out and reverses anwyay.
So watch the action carefully just below and just above that upper channel around 1130 S&P and around 10,700 Dow.