Monday, October 05, 2009

Weekly Review of Stockcharts.com Publishers' Charts

Bears reared their head last week, but have they done enough to dent the confidence of bulls? The Stockcharters discuss.

Anthony Caldaro of Objectiveelliottwave has a clear major 'B' of an 'ABC' corrective phase in place for the 60-min SPX; so will the next rally stop short at last Monday's highs?


The alernate (bull) count was given for the DOW - not sure I see this as a triangle though (necessary for an 'abcde' count).


Yong Pan of Cobrasmarketview has a clear bearish intermediate picture but a mixed view on the short terms


Gap support for a bounce play in the SPY


Resistance playing out nicely


Good downside targets from the triangle breakdown


Confirmed 'Sell' on breadth


Richard Lehman noted new, sharper, down channels.

10/3 -- I think the channels are giving us a good read on what's happening now. The short term charts have all broken into purple downtrends. Because it is universal, there is little doubt. The only chart that is still climbing is the Bombay index. Also clear at this point, is the fact that the new purple downtrends accelerated into steeper channels when they broke.

None of this surprises me as everyone was continuing to buy dips at first and the bullish outlooks were being pushed even higher now that expected targets for this year (like Dow 10,000) were being approached. Once the correction picked up a little momentum, it accelerated as people realize this truly IS a correction and not a dip. I strongly suspect the thinking among portfolio managers now is rapidly changing from 'I can't afford to be in cash while the market is rising' to 'I better lock in some gains so my year still looks good'.

We may bounce within the new purple channels this week (as we started to do Friday morning), perhaps retesting the green line breaks. But bear in mind that we are in a new downtrend and that it is likely to define October's performance. On the Dow one-year chart, I point out how this could easily and up looking like the June/July correction, which would bring the Dow down to around 9000 by later in the month. That may not be devastating, but it is certainly not an up move.

A postscript on volatility: The VIX futures had been saying for months that October would see VIX in the 28-30 range and voila -- here we are. Now that we are here, the futures have not only subsided, they are at slight discounts for this month and nearly flat for November. That shows you how prescient they were this summer. They also confirm my suspicion that we are going to bounce around with a downward bias for the month, and neither fall off a cliff nor rocket upward. The good news for bulls is that it could set us up for another nice move up in November, as October lows are prone to do.

Joe Reed summary:


Gold and Silver index oversold and looking like a bull flag:


Even GLD has a head-and-shoulder look to it:


Matthew Frailey of Breakpointtrades shows a clear breakout in the VIX


Finally Ahsan U. Haque of themarttrader has a couple of confirmed breadth indicator 'sells' but an index (and other technicals) bang on support (oversold)


The next bounce will be interesting as it could be the one when sellers really hit the indices; last Monday's highs might be a step too far for bulls.


Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

 
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