Wednesday, May 20, 2009

So far still bearish

In today's column I point out a few things about the market that remain bearish as well as lay out a bullish scenario. The VIX dropping like a stone only gives me more reason to doubt the rally.

Also, the trendline from the low was tested from below today (it is not yet 3pm Eastern as I write this). If we get a weak close, resistance holds, momentum divergence and volume was up on a reversal day. If we get a strong close, we still wait as discussed in the column.

As for the reader poll, the results were not conclusive enough for mention in the column. We can keep the results among ourselves here and note that the majority look for declines from here. And half think it sets a new low.

Are we to be faded? As I said, the percentages were not conclusive and our sample size was small. However, blog readers are typically more sophistacted in the markets than folks who just hand their cash over to advisors. I'd say we - and I mean you - do not represent the public and may be closer to smart money.

Be careful fading anything. It really has to be something quite lopsided for true contrarianism.

5 comments:

sdrfla said...

great blog, found it through your Barron's article

MrWave4 said...

The offence/defence chart is now showing a lower low & a lower high with the SPX daily showing a harami pattern followed by a candle with a long upper shadow.
All of this might be signaling the rally is "running out of steam" ?

Quick Takes Pro said...

MrWave4 - it sure looks that way

Quick Takes Pro said...

sdrfla - welcome!

Socs26 said...

My take on the uptrend since the March lows, is that the SPX, has formed an ascending wedge formation, which it broke downwards last week. What we see now is probably a retest of the lower trendline of the wedge, as the SPX tries to resume its course. If we combine that along with the negative divergences that seem to be forming on a number of ocillators, and with the overhead 200 DMA resistance (which will probably need a lot of strength to be broken), I think this rally is probably at its last stage...