Tighten Up
It’s getting harder to find anyone with a
strongly bearish opinion–at least for the short-term. Gary Kaltbaum told me
this morning that the bulls are dominating the airwaves more so than in recent
memory.
My first call after the market closed was to Dave Landry. He told me that
there’ll be a new CVR II signal with a directional bias of “down”
based on Wednesday’s close. That will be combined with Tuesday’s CVR III
signals–also with a directional bias of “down.” Check out the Market
Bias page tomorrow morning. Complacency fills the air.
Can the market stay strong in the face of this? Of course it can. But these
are some telltale signs that tell you to tighten your stops (if you’re long) and
reduce your exposure.
Pattern-wise, I see that we’re at an area where you’ll want to watch for
signs of resistance. Notably, this is well before the 3000 level so many market
analysts are in love with.
The Nasdaq Composite is hitting an internal trendline that forms the midpoint
between the top and bottom of a downtrending channel. This midline will have
some familiarity to adherents of the Andrews Pitchfork. Also at this price
level, we have the 50% retracement off the Oct. 20, 2000, high and the January
3, 2001, low. You are certainly right if you question that as a viable swing from
which to calculate such a retracement. But, to me, it fits because the 3000
resistance level corresponds a 61.8% retracement off the very same swing.
The Naz can certainly slice right through all these lines like they don’t
exist. After all, the market doesn’t care where I draw these lines.
But…certainly a prudent thing to do would be to watch for signs that it
does care.
See you Thursday,