Monday, February 12, 2007 Weekly review

Other than Friday's sell off there wasn't a whole lot to report about on the week. So, how did Friday change things?

Joe Reed opened the bidding with this comment on his lead chart:

Fri. 2-9 dr. joe's MARKET COMMENT:
A Sell Off is Inevitable, but When?

143 trading days without a 2% dip is second only to a streak in 1953-54. Historically, on the Average, a BEAR Market occurs once in every FOUR YEARS. This BULL market started Oct. 2002, so on Oct. 2006 it was four years old. We're approximately four months past the average now.
Recently, the price of oil increased from 50 to 60 and the stock market didn't even flinch. But the market is over-extended and the run of good luck is getting scarey to Wall Street. We have to stay bullish in a bull market, but 'Cautiously Bullish' is the proper term for now.

He has a good chart for the S&P which looks to have been a John Murphy chart - but it is worth seeing:

Joe has a good chart of his own for Crude Oil:

along with his bullish percents for the Energy Sector:

Ted Burge also has taken a look at the Energy bullish percents:

and had this to say on the market:

Sunday Feb 11, 2007! COMP in a unique position! The HIGHEST BULLISH PERCENT LEVEL since April 2004. One chart to watch and if (IF) resistance becomes support on this chart, get on board for a ride.

Energy and Gold Bullish percents have not moved this week, and there has been a serious challenge to demand on lot's but NOT everything (of course at resistance).

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Here is his Bullish percent chart for the Nasdaq:

Mitchell Meana kept with his series of clear charts. I noticed he hasn't picked a wave 5 top in the S&P.

or for the Russell 2000 (although he has an upside target for the ETF):

Matthew Frailey is more cautious in his approach - highlighting the numerous bearish divergences in the Nasdaq:

But the broader picture still looks good for the Nasdaq:

But the make or break for Tech averages will likely come from the directional break in the semi-conductor indices:

Robert New also led with the bearish divergences in the Nasdaq - his chart is a close replica to Matthew's (or vice versa depening).

Maurice Walker noted key breaks in short term support of the Qs and SPY. He had this to say about the state of the markets:
2/10 Commentary: The SP 500 broke down slightly below our support level of 1440, closing at 1438. The SPY managed to hold support closing @ 143.94. I wouldn't call the SP 500 break decisive. Prior resistance could still act as support, due the fact the close was so near to the support level of 1440. Lets watch next week with skepticism.

The Dow and SP 500 tagged their rising support trendlines and managed to bounce off support. We have had a rising trend since our summer lows, but the market for about the last two months has been more or less trendless. The Nasdaq has really traded in horizontal sideways trendless direction.

Friday's break down on the QQQQ's 30 minute chart was not a healthly sign. Many technical traders watched as the Q's formed a reversal H & S pattern, which began to form on Jan 18. The pattern broke out Wednesday, backtested Thursday, and broke down Friday (see first chart below). The bids dried up and people lost conviction in the rally. This caused a break down in the Q's on Friday. On a positive note, we still have higher lows in place that could bring about a recovery taking us back to 44.25 for a backtest. Our previous support of 44.25 now becomes resistance. Short term I would say that this market is now extremely volatile and could have wild swing moves and shakeouts.

Any violation of major support levels on the Dow, SP 500, and the Nasdaq will give way to an intermediate correction. Lets see if the SP 500's 20 MA will be significanly violated, and then see if it starts recycling downward. I am not saying the advance is complete but I am saying if certain criteria is met the odds of a correction occurring increase. This market could be dangerous to trade in the short term right now.

Its still all up for grabs - will short term weakness broaden to influence the (still) bullish aspects to the long(er) term picture? Plenty to play for.

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