Sunday, March 30, 2008

Stockcharts.com weekly review

Dr. Joe starts with his weekly review:


Interesting to see a new high in the FXE, but no confirmation with a new low in the USD? Bullish divergence for the dollar?:


Has Health Care hit support? A fairly ragged looking chart.


Ted Burge cast his eye on the NYSE's 20-day and 50-day MAs. Horizontal support at 8,671 also within range:


Maurice Walker has no weekly commentary, but his Streettracks Gold Tr (GLD) nicely shows the breakdown of one support level, but the presence of a stronger one nearby. Double top from here anyone?


His Weekly Major Trendline is perhaps the best entry point for bulls:


He has a good piece on the ADX:

The acclaimed author, Dr. Alexander Elder of Trading For A Living fame, recommends taking a trade once both the +DI and ADX lines are above the -DI line. This would trigger a trade once the ADX line crosses above -DI, assuming that the +DI has already successful made the cross. Dr. Elder also suggests getting long if the +DI line is on top and the ADX has moved four steps above 'its lowest point below both directional lines.' That would mean if the ADX bottomed at the value of 7, a trader would initiate a long position once the ADX rose to the value of 11. This would provide an earlier entry point for a trader, rather than waiting for the ADX line to cross above the -DI line. But currently at this time the ADX line on the S&P 500 daily chart is still declining, so no trade would have be triggered yet using this trading strategy.

So let's continue to watch the ADX and the MACD for conclusive evidence that a change in trend is occurring. Both indicators are making a strong case to believe that the candlestick reversal patterns that formed on March 18th have produced a tradable bottom. Momentum is strong right now, but if the recent rally off the March low is to be successful in changing the trend, we'll know it by future examination of the trend indicators. However, based on the recent candlestick reversals patterns and bullish crosses on the MACD and the ADX, I think it's a forgone conclusion that the tide is changing and a new trend is under construction. Now whether the momentum is present to carry prices back above the S&P's 500 October 2007 all-time high is still questionable. But the true test of a trend would be if it had the strength to break the long-term intermediate declining trendline as seen in below. Using trend direction indicators to confirm candlestick reversal patterns, which are momentum based indicators of price, can often be mutually incompatible. Especially if prices are trendless.

This combination incorporates both trend indicators (long-term direction), with candlestick patterns (short-term momentum), to indicate long-term price direction at its earliest possible stages. So that in the words of Thomas Huxley, 'you can have your cake, and eat it, too!'

As it related to this chart:


His Transport chart hints at the developing bullishness:


Richard Lehman had this to say about the market channels - looking for a new turn of bullishness:

3/28 -- This past week's activity gave us some nice trades to the downside as the indexes kept to very well defined declining minichannels all week. Now get ready to get long again! The minis were relatively tame and while they broke some upchannels on the 5-min charts (like here on the Dow), they brought several indexes (RUT, SPX and SPY) precisely down to the lower lines of their hourly chart uptrends on Friday. The Dow didn't quite hit its lower line but is close. This suggests the possibility of a nice bounce upward this week.

Bolstering this bullish prognosis are several things:
1) The one-year charts show a number of breaks to the upside which came back this past week to essentially retest (successfully thus far), and that's positive
2) Gold and oil are declining
3) VIX is not spiking back up yet
4) Quarter-end window dressing was to hold or sell for institutions -- not surprising for such a lousy quarter. They may now be ready to start picking up bargains in the new quarter.

3/27 -- Today's action followed right in line with the minichannels of the last few days. The Dow hit the top of the mini three times today before dropping to the bottom. The key item is that we're now seeing breaks downward from the recent ST uptrends to what is likely to turn into new ST downtrends (even amid the longer term bullish scenario). Naz and QQQQ clearly broke their upchannels and the Dow just slightly. The angle of decline isn't very steep but a break is a break. Maybe they will just be short ones...(or maybe they will accelerate into steeper declines)

Finally, Yong Pan has a detailed summary of the week heading his list.


With a 'Buy' trigger in the S&P


Although his weekly chart shows a double rejection at the 13-week EMA:


 
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