Tuesday, February 24, 2009

The case for a turn very soon (or not)

All charts are courtesy of http://www.stockcharts.com/

The case for a turn soon:

1) CPC Put Call ratio appears to be topping out

2) SPXA50 appears to be bottoming out

3) VIX wedge is ending

4) SPX (on my 60m chart not pictured) is bottoming out on a lt trend line and is also nearing the end of a falling wedge formation that is consolidating in the bottom of the funnel.

5) SPX has reached a perfect 1.68 wave length of wave 1.5 (if it is 3.5 and not still in 1.5)

6) SPX RIS 60m is in a sort of descending triangle that looks like it is running out of steam

7) The most consecutive down days in this bear market were 7. We just completed 6.

8) Oversold is an understatement (in some people's opinions)

The case against a turn is simple:

1) Until RSI turns above the dominant trend line we go lower.

2) Indicators across the board still look like crap.

3) The economy

4) The global Economy

5) Our banking system is broken

6) Did I mention the indicators would have to do a 180 for this market to turn?

7) The ema 10 has to cross the BB's 20ma before a turn can happen. They are not even close to each other.

I'm not advocating a turn to 1,000 SPX. Not even 850. I'm not sure it will make 800. I'm just saying a pause for the cause may be in order. Heck, a plummeting crash is in order actually. The conflicting signals are a little confusing. What looks good and what you want to see may not be real. I'll go with the indicators down for now, but not for long. The SPXA50 is just too oversold. Do you realize that on 01/01 there were 400 stocks in the S&P 500 over their 50ma's and now there are only 60ish? That is brutal.

Some of the lower targets I'm seeing for this fall (wave 5) range from 648 to the high 500's for SPX. We will throw in one more Zag upwards before then. Just when? Will it be wave 2 or 4. If this is 1 and 3 is the impulse kick ass wave we all better be loading up on canned goods. As for the ultimate bottom? Who knows when or where, but it will be this year.

Good luck today. Keep your powder dry and stops tight.

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