This is a weekly chart
The short squeeze run off the crash lows of Thursday ran into resistance around 1170. We have the pink actionary line and the 1175-1200 range.
In the post of May 8, I said:
“A rally attempt is not out of the realms of possibility.
The rally (if it comes) would have to start on the back of late and shaky shorts, so, maybe some more shorts are needed to be lured in early next week for a good squeeze
The rally (if it comes) may eventually fail as shell-shocked money managers may sell into it.”
There was no more luring-the-bears (were they exhausted?) after that and we had the short squeeze in full force after the European bailout news. Today was a first attempt at serious resistance and it failed (or ran out of gas) like we thought it might.
There is support from 34 and 89 EMA which are rather close to each other and look flattish. Notice that despite the roller coaster events of last week, S&P has not had a weekly close below 34 EMA since July 2009. Also notice that 89 EMA held the Feb 2010 correction in check.
Below the MAs is the 1070 area, which, to me, is a must hold. Also notice that index has so far behaved well around the dashed black line that can be regarded as the lower boundary of a channel (with the upper blue line as the center line)
If I wanted to bet on the long side, I would entertain some strategy with options, or a mix of options and ETFs/Futures with planned risk distributed between 89 EMA and the 1070 area.
Before seriously entertaining the long side, I would like to see if the action today was a prelude to more selling or not.
This is a daily chart
Daily price is sandwiched between 21, 55, and 89 EMA. If the bull is still alive, index should start closing above 55 EMA soon. Our 1168 (+/-7) pivot seems to be good marker for the positive and negative action for now.
Daily chart has a positive technical profile. The mid-term trend is down, but bears have to do more than a change in trend if they want to be regarded as players. They have to break the technicals. I would like to remind you that the mid-term downtrends of July and February did not last long after the Daily chart got oversold on the RSI. Let's see what happens this time.
Daily volume has been shrinking on this rally.
McClellan Oscillator seems to be pulling back from neutral and from under a downtrend line. That is consistent with the failed attempt at resistance today. From a longer term point of view (days/weeks), the Summation Index has to become positive to indicate that much of the breadth has been repaired.
Percentage of stocks above 50 MA and 300 MA bounced sharply this week.
Rate of change of A/D line is still negative and I would like to see it advancing if this is still a market of bulls.
This is a 60-min chart
The rise from Thursday massacre looks rather impulsive. I have a bullish label on the chart but I have not ruled out any of the alternates that I presented a few posts ago.
Let’s just see if the index corrects some more, and if so, how it corrects.
Long term trend is up. Mid-term trend is down. Short term trend is up.
OEW pivot support is at 1146 and 1136. Pivot Resistance at 1168 and 1176.
Have a Nice Evening!
PS. Is the announcement of the previous weekend by Central Bankers for real or just smoke and mirror? With the FED, we could follow many acts of monetization and liquidity infusion. Mostly after the act but we are talking serious money with delayed effect lasting days (or weeks). Europeans have so far talked a good show on many occasions but the actual stage of the show had no actors -- No Actors, No Show!
Sure they get a quick reaction from a panicky oversold market place by some blah-blah lip service of solidarity and guarantee, but are they going to show the money?
PS2 If they finally stop talking and start actually printing, how easy will it be to track this time?
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