Price continues to make new lows on volume. I have noticed a few divergences to go along with the II and AAII surveys as positives.
- The McClellan oscillator has started up before price
- The Advance/Decline lines have started up before price
- High volume on a lows points to capitulation
- The monthly NDX chart could move the July monthly chart positive with only a few percent move up
- AAII and II show many more bears than bulls
What we need to watch out for on a rally is becoming over bought with a lower high. The Nasdaq 100 (NDX) should take out the June monthly high on a rally. This is a 13% run for the NDX but easily doable in a real buying spree.
Price on the SP500 Index (SPX) is at the 1:2 Gann Angle of the 2002-2007 range. I am hoping this will provide support. When the market does turn there is always a price-time reason. I usually can see these months before they occur. This low is the toughest I’ve had to analyze since I started looking at the markets using price and time. The problem is probably with me and not the market. Gann discussed price and time overbalances as excellent investing opportunities. So, overbalances do occur. But so far when looking back at long term charts, I have always been able to find a cycle that affected price. An overbalance may actually be an excuse when the analyst can’t figure out the cycle.
An interesting finding is that the 1:2 Gann Angle from the 1982-2000 range square is within 4% of the 1:2 angle from 2002-2007. It is tough to say the SPX does not have long term symmetry.
Chart courtesy of Stockcharts.com
As for what to buy if the market turns, I posted about the Biotech stocks looking good last week. The NDX and QQQQ are the strongest indices. The Russell 2000 (RUT) looks weak but still has not taken out the March low. Surprisingly, some retail charts are looking good. Telecom Holdrs (TTH) is basing while the SPX is dropping. And finally, I pointed out a while ago that Apple Computer (AAPL) looks good in the short term - but I don’t like the long term chart.
Tags: AAPL · Biotech · Gann Angle Fan · Market Cycles · Market Outlook · McClellan Index · Nasdaq Charts · QQQQ · Russell 2000 Smallcaps · Standard and Poor's 500 (S&P500) · Volume5 Comments
5 responses so far ↓
there will need to be a catalyst to push this market up,if not the banks go under and we are doomed,my obvious guess would be oil dropping 10 on monda and down to 105 by august,i don’t know how they could manipulate oil to pull this off,but it will happen.this explains a turn between your gann and ew #s,fundamentals trump ta,and if we ever needed a fundamental surprise it’s now
Mike - the catalyst could be the fact the gov’t has agreed to back everything - similar to Bear Stearns. There could be more downside next week to clear the books so I would only buy strength.
Mike, govt backing up F&F was announced early on friday.. The market was going up and things looked ok.
But reuters incorrectly reported that Fed will back the Freddie Fannie shareholders. After that , CNBC came out with a bazillion segments saying that Reuters was wrong and market went down.
I think Freddie has to sell $3B of securities this week. The securities are usually bid by the big banks in NYC. Fed called all the banks this morning and had a positive feed back in that those banks will keep their bids on.
In my opinion sale will go ok + the bank earnings this week will not be as hellish as priced in the stocks + couple good statements from the govt and we can have a little rally.
Andy, mike, TK, looks like a dead cat bounce coming today, Look at the dow, she has broken, and needs to end up at 10.700 thru to 10,000 area, also looks like a subminute wave 4 that where in right now and she needs to go up to finish back to 11,400 area, should she form a triangle, we’ll bounce up and down for a few more days till we drop again. I don’t have the same for the S&P, I believe we are not seeing the writing on the wall with that index, she’s been changed so much with the addition of so many strong co’s. that she doesn’t show her true colors? Guy’s I really think this is the big one, we may get a rush back up, and thats OK with me, but I think preservation of capital is personally what may be in the cards right now. I see Dow 10,000 coming really soon.
Oh I forgot to mention INDY Mac bank, she’s broken sitting at 28cents. The financial bubble is broken, one by one they are popping. Housing, banks, techs(2000 #1), what are our homes going to be worth 3 years from now???? gold next? Can Bernanke save all of this???? My mother was born in a depression, I think we are heading into the GREAT GREAT Depression!!!! sorry to go on have a great trading day guys Thanks .