Saturday, October 27, 2007

Stockcharts.com Weekly review

Bulls kept things going as well as could have been expected given the weak action in the semiconductors. What had the Stockcharters to say about it?

Dr. Joe kicked off with his weekly summary:


Joe is watching for a potential double bottom for stochastics in the Dow:


Maurice Walker has reason for optimism:

In the valley where I live there was a man named Gordon Elwood, but all the kids nicknamed him Stan-the-Can-Man. The elderly Elwood rode his broken down old bicycle up and down the streets, digging cans out of dumpsters to recycle for cash. Most people were repulsed by his appearance and assumed he was homeless. He was shabbily dressed and wore second-hand tattered clothes. He used a bungee cord as a belt to hold up his pants. Elwood's bedraggled appearance was a pathetic thing to behold, but mostly Elwood was ignored.

He drank out dated milk, eating old bread, and he accepted food hand outs from the Salvation Army. He showed up on holidays at charitable organizations to eat free meals. He would fill his pockets with cookies and drink refreshments at the local bank.

Elwood wasn't homeless though, he had worked as a T.V repair man for 46 years of his life and eventually retired in 1985. His house had no heat so he slept in a sleeping bag. The house looked like a shack and the paint was cracking off of it, and there were leaks in his roof. The house was encompassed by old broken down television sets and parts, looking like a junk yard.

He adopted cats from animal shelters. He had so many cats that his neighbors complained. There were discarded tuna cans all over the yard that his cats ate from.

But Elwood was no pauper. He died in October of 1999, and the entire valley was surprised to learn that 'Stan-the-Can-Man' was actually a multi-millionaire worth over 10 million dollars. He was a miser that was a financial genius who masqueraded as pauper, making his fortune in the stock market. He left 9 million dollars to several charities such as the Red Cross and a cat rescue charity.

Looks can be misleading. Last week we had a 4 percent selloff as the bad news bears talked of recession and inflation, but this week we had a 2 percent recovery. Don't be deceived into thinking the bull market is over as they warn, we appear to be in wave 5 of major wave 5.

He notes the rapid bounce from outer to inner Bollinger band is a sign of strength - much like it was in August (although the internals were far more oversold in August than they are now):


His detailed review was as follows:
Market Review: The recent selloff provided a moved to support on the indices, allowing for a nice area to cover shorts and find a new long entry point. We saw wave 4 move to just above the peak of wave 1 on both the Dow and Nasdaq. That along with some bullish indicators, such as a bullish crossover on Stochastics on the daily charts and positive divergence on the hourly charts, provided us with a timely entry. The Bollinger Band chart above confirmed my decision to go long as prices dropped below the lower band.

With today's rally, the index 60 minute charts have broken their falling price channels. We also witnessed the breaking of the downward trendlines on the RSI on the daily charts. During the entire corrective phase so far, the RSI has remained above the value of 33.33, thus we remain in an uptrend. The selloff has caused a much larger trend channel to develop, not having such a steep angle of ascent (see the Dow and S&P 500 daily charts). I continue to believe that we are forming Cup with Handle patterns on the Dow and S&P 500.

We also saw a conclusion to the Elliott Wave Zigzag pattern on the Dow's hourly chart. It appears the subwave sequence had a truncated fifth wave, which caused it not to move below wave 3 (see Dow 60 minute chart below). The subwave sequence on a Zigzag is 5-3-5.

I closed my short on the Qs and my long on QID, down sizing my risk, due to the positive move in the overall market. I remain long on the large caps DIA & SPY. Crude Oil appears to be completing wave 5 and I will cover USO (see 3 chart down) as the hourly chart suggests a reaction next week. I remain short on XLE based on the sell signal on energy's bullish percentage index.

We are developing Rising Wedges on the 15 minute charts (see last 2 charts on this page), which may allow the breakouts that occurred on the falling price channels on the hourly charts to backtest their breakouts. Study the hourly charts on page 2.

His Dow 60-minute chart and S&P target are below (others are available by following the provided link)



Jack Chan is back with his 'sell' triggers for the Oil Services:


Energy Select:


and Gold and Silver index:


Richard Lehman has gone with bullish channels for the major indices, but these may only be minor moves of a larger downswing:

10/25 -- The short term trend channels are all still nicely intact -- upward on the major indices and downward on XLK and XTC. Having just bounced off lower support lines, the majors can work higher in these channels. The disconcerting charts are the dailies, which show the indices only part way down from long term channel tops. That leaves the strong possibility that these short term upchannels are the midcourse bounces within declines that are not yet complete. We need to be very mindful of these ST upchannels ending in another hard spike downward as in August.

10/24 -- The seesaw action actually cleared up the short term picture quite a bit today. The major indices are in short term uptrends, though wider and less steep than the initial bounce off the bottom suggested. That's actually good news for further advance in the very near term. Longer term, however, is still questionable and there is a lot of potential vulnerability remaining on the downside.

10/23 -- Techs helped things continue their bounce today, enough that I was able to draw short term upchannels at the mini level. However, the mini channels are narrow and may not last long. Also, I keep looking at the Dow one-year daily and seeing a very similar pattern to the decline in July-August where a move just like this took place. That one turned out to climb a bit higher and then dramatically decline again to lower channel support.

Howard Blackstein has an interesting chart for the 5-yr Treasury yield. It looks like a major support level has been tested and it is ready to bounce higher:


As a final note, Adam Straseske has some simple charts showing a trade "Green Line".


The Dow Jones World Stock Index is looking a little rich in the short term:


and New York Stock Exchange needs some volume, but Summation Index has room for upside:


But the China index has perhaps the most telling chart:


Bulls still look to be in the game according to the Stockcharters. Next week will be telling as markets could do with some upside volume.




 
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