Tuesday, October 21, 2008

One order of a Double Bottom coming up....

We are not there yet but markets are doing their best to shape one. Short term traders have an opportunity to trade long side to the neckline of a double bottom. Long term traders will want a neckline break to switch all trading within the double bottom pattern as a mix of supply and demand into all demand (i.e. anyone who traded through the double bottom pattern is now a happy long, or an unhappy short looking to cover/buy).

Should(When) the Nasdaq make it to 1,900 I would watch for a gap open; this gap will turn the double bottom into a stronger island reversal.

Large caps looking good too:

Transports have additional support from the broadenig wedge with bear trap (good news for early recovery sector leaders):

Vix has made a neckline double top (on a closing basis). Note bearish divergence in stochastics:

Still fear of worse to come from the Hedge Funds which will keep the doubters sidelined until it is to late (or the bounce will be sharp enough to allow Hedge Funds to hang on before they seize their opportunity to exit stage right) - I think the Hedge Fund meltdown will be next year's soul destroying walk down back to lows and beyond. For now - a little optimism for the next few months is not misplaced.

My latest Blogger Review of the Ticker Sense Poll is over on the Zignals blog.

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts and stock charts website