Market Setting Up For Action
After a 20% up move from its
lows, and four weeks worth of time, the market is well within its historical
time window for a retest as seen following other major bottoms (1970, ’74,’ 87,
’98). Overall volume has waned
considerably since the July low, and volume on Friday and Monday was
considerably below average. When
volume and range decrease like this, the market is usually on the verge of a
very large move.Â
While the odds favor a
retest, there is no guarantee we’ll get one. You really must either play with tight stops, or wait until the market
shows its hand before jumping on board. The market is ripe for a move, but there’s no definitive way to tell
which direction it will go next. Note
that the SP 500 is trading above its 50-day average, but is also
dangerously close to its short-term uptrend line of the past several weeks
(see chart).
I am bracing myself for the
worst, but I am also aware that the market is acting pretty good lately. Indeed, in my nightly service, we are still long Oil Service HOLDRs from
a price of 54.60, and we are also still long the U.K. iShares from 12.80 (see
chart).
One more thing before I go. We had a beautiful stoch-trap short signal last week in the Russell
2000 iShares
(
IWM |
Quote |
Chart |
News |
PowerRating). The signal
came on Thursday night. On Friday
morning, after the market took out its 10:30 low, the Russell 2000 iShares
quickly racked up a quick 90 cents worth of short-side profits. If you’ve got
an intraday chart of the IWM, check it out.Â
Cheers,
Dan