Thursday, January 29, 2009


I can't say that we're going to go up in a straight line, as there will be consolidations, but at the moment, we are likely to head higher over the next few days. Looking at a 15-day chart, we are in the 865-880 trading range on the SPX. Did you notice how symmetrical the chart is becoming? It means that we could be consolidating here before another breakout. It's apparent that strong-handed longs will be holding their positions for a longer short-term period.

I signal some caution because we've been up for 4 days straight, and the chance of a down day is extremely high, but that shouldn't bother you unless the majority of yesterday's gains are wiped out. Before that happens, though, it's important to identify a down day as a normal correction (pullback on low volume) or an all out meltdown (accelerated sell-off on high volume). A nice correction is the opportunity to add onto existing positions.

Make note that the 20, 30, and 50-day moving averages will provide support/resistance (on the 40-day chart). Use these MA's as guides for today's trading, because they will dictate the pullbacks and bounces.

We also have durable good orders (8:30AM EST), jobless claims (8:30AM EST) and new home sales (10:00AM EST) coming out today. The consensus for the durable goods is -2% with a range of -6% to +1.2%. The previous reading was -1%. The consensus for jobless claims is 575,000 with a range of 540,000 to 650,000, although I believe the whisper number is getting bigger every week. The previous reading was 589,000. Finally, the consensus for new home sales for Dec is 400,000 with a range of 350,000 to 410,000. The previous reading was 407,000.

Don't forget that we have the GDP report coming out tomorrow. The expectation is -5.4% Q/Q change! The previous reading was -0.5%. The range is -7% to -3%. Terrible.

Don't forget to try the Free Trend Analysis. It's FREE, so give it a shot!


JWC4 said...

XLf had an ext time support level of 9.90 last night and this morning it looks about the same. do you think the open will be the largest part of the pullback or do you think we will continue to see selling for the balance of the day?

John C. Lee said...

Depends on the opening action, first 30 minutes.