Sunday, November 12, 2006

Weekend Commentary from Fallondpicks.com

Newsletter, Members Click Here I have just completed my review of the opinion of the public Stockcharters (available every weekend) and I was surprised by the general net bullishness of the comments. Mitchell Meana's charts were particularly interesting given he uses simply illustrated Elliot Wave counts (something I can never get right); his opinion favors another leg of the rally - whereas I am sticking to my more bearish tone (it is important to look at all sides of the argument). Even if this final leg was to come to fruition, one would still need to be cautious on adding new positions, but existing ones may enjoy another profit surge.

The indices closed the holiday Friday on light volume (no surprise) with no real change as the battle to beat resistance continues. The areas to watch remain the bullish divergence of the NASDAQ MACD; the indicator is currently running along this support line (the NASDAQ 100 MACD is well above its bullish divergence). The increasing divergence between large caps [as measured by the Dow] and tech [as measured by the NASDAQ 100] - which in the current state, is bullish for the market. Rising channel support in the Russell 2000 as it fights 770 resistance (the index is tightening into the apex of these support/resistance levels). The 200-day MA resistance in the semiconductor index - still much work to do here before it gets anywhere close to matching the strength of parent tech averages [NASDAQ and NASDAQ 100].

Tech market internals [$NASI, $NAA50 and $BPCOMPQ] showed some improvement as the $BPCOMPQ finished the week at new reaction highs with a return to overbought levels in its ultimate oscillator - the flip side was the confirmed break of the June-July bullish divergence in its MACD. The $NAA50 regained its 5-day EMA, but I would look for a break of the bearish divergence running from early October before I would consider this out of the woods and back on the bullish track; it too gave up it May-June MACD bullish divergence (and is heavily influenced by is Sep-Oct bearish divergence). The $NASI was little changed, but the Sep-Oct bearish divergence in its MACD is the primary concern for bulls. Finally, volatility lost support with the second of two big losses; 16 support is no more - prepare for sympathetic upward breaks of resistance in tech averages (with other indices to follow suit soon afterwards) - this will be false dawn given how deeply oversold volatility is.

As per last week, I am holding to my bearish sentiment in the Ticker Sense Blogger Sentiment Poll (bearish since September 23rd); based on this poll I have been wrong for the third week in a row :(. But I hope I have made clear why I am bearish on the markers in the foreseeable future.

Newsletter update:

OMCL clipped its stop at the very intraday low of Friday. The October 23rd Subscriber play closed for a 9% loss. VAS closed Friday on a bullish hammer, but it its raised stop in the process. The November 8th play closed for a 5% loss, the August 10th play closed for a 1% gain.


 
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