S&P 500 - March 26, 2009

charts courtesy of stockcharts.com

The rally continues.

This must be really painful for the remaining bears. The index just does not let up. And, then, there has been that late afternoon rush to buy.

Today, in some uber-bear blogs, I saw some openly talked about throwing in the towel, some had drawn areas on charts showing where they might quit, some had super bullish chart projections and called them possibilities. Gone seems to be the sense of entitlement to riches from perpetual market crash.

The sooner they fold, the closer we may get to a pullback. I say may, because the other possibility is that the loafer type, underperforming, always-late money managers may feel the heat and get scared of losing the bid and really looking like a fool. If that happens, then the mad dash may become a stampede to just buy.

Every market participant with a bit of technical knowledge can see that the index is above its 50-day moving average, and that the short term moving averages are either rising or flattening.


Technical posture like that may give a lot of people the confidence of holding on to a position, and confidence is a key factor in this game.

Today’s action presented further signs of diminishing short term momentum.


Also notice that the action today was held back by the center channel line. This is like an athlete running the extra time on adrenalin only. But there is no saying how far he can carry before his muscles say Enough! Still, the series of higher lows and higher highs is intact and, as such, the short term trend is still up.

Those who get themselves tied up with fancy indicators and subscription-only trend oscillators should not forget the power of a good trend line drawn by a simple ruler.

The new high set today opened the door to a multitude of wave count possibilities, no such thing as just a simple, impulsive market.

I am going to continue with the one I have been counting so far

But it can be counted in different ways, like this for example


Notice that we also have serious negative divergences on the 60-minute frame as well.

Here’s another


Let’s not spend too much energy on the short-term count. Iinstead, let's focus on the fact that we are looking for an end to this up leg, and that the short term price action has been advancing on decreasing momentum.

It is against my technical principles to start a long a position here. If I were long, I would take a look at what I had and start thinking about profit-taking scenarios. It is a matter of individual style how to take profits or what portion of positions to let run.

For the day volume contracted. In fact volume has been contracting as this rally has progressed. Breadth was positive.



Short term trend is up. Mid-term trend and long term trends are down. The strength of the rally suggests a high probability of mid-term trend turning up in coming days - just a suggestion. Current rally has improved a lot of technical measures, but there are signs of short-term weakness.

Trade a safe Friday!