Monday, October 16, 2006 Weekend commentary

Newsletter, Members Click HereVery little to add to Thursday's post. Markets are overbought - but could stay this way as they bump along ever higher. The good news for bulls is the various trend channels in play across all the key indices listed on my public stockchart list. The biggest shift was in the most current (most bullish) alignment of the markets with small caps [Russell 2000] now leading Tech [NASDAQ] - {Small cap > Tech Indices > Large cap}.

The chief change elsewhere was the new MACD 'buy' trigger in the semiconductor index, combined with a resistance break of the bearish divergence in its CCI. The index trades inside its former rising channel and is well positioned to climb higher. There should be enough momentum to see the upper part of the channel at around 510; only the 200-day MA at 477 could spoil the party.

Tech market internals [$NASI, $NAA50 and $BPCOMPQ] increased their rate of ascent, but having cleared cyclical bear market reversal zones they now have plenty of room before encountering resistance levels associated with bull markets. Volatility could be the early warning system for a decline - the small bullish harami cross sets up a fear spike for Monday/Tuesday - whether that builds into something more fearful will remain to be seen.