Multiple Signals Of Merit
If you’re watching for multiple indicators or patterns to all line up at the
same time, you have to be alert to many possible variations on this theme.
I’ve talked a lot about combining retracements with moving averages,
trendlines, and support at recent highs or lows — within a strong trend. Here is
yet another example of this from Friday’s action.
FirstMerit
(
FMER |
Quote |
Chart |
News |
PowerRating) is bouncing following-through off a bounce from its
50-day moving average, 50% retracement (Oct. low to Dec. high) and 38.2%
retracement (Nov. low to Dec. high). In today’s action, we see a long tail (as in
Jeff Cooper’s Lizard). FMER dipped early in the market, recovered, and that
rallied into the close. That momentum may continue into the next session. I
also like the fact that, going back the past eight months, FMER has a history of
finding support off the 50-day moving average. You’ll want to watch for signs of
follow-through on Tuesday.
Now–on to the bigger picture. And I
mean bigger. When everybody sees the same thing, I get a little antsy. My
unscientific observation has been that when many market-watchers see the same
thing and draw similar conclusions, the conclusions tend to be wrong. Right now,
everybody is seeing the 2700 level as critical. I pointed that out myself on Thursday.Â
I have to take step back see if
there’s another angle that fewer people are noticing. Let me throw this one at
you.
This is a monthly chart of the Nasdaq
Composite using a logarithmic scale. We are now bouncing from the 61.8%
retracement of the big ten year swing from the Oct. 1990 low to the March 2000
high. My observation is that if a bottom was going to form some time in the near future, this would be a nice place for it happen. No–that’s not a prediction. Just an something for you mull over during the Martin
Luther King Jr. holiday. That’s something I’ll be doing–you can be sure of that.
Have a great holiday weekend — we’ll see you Tuesday,