Friday, January 16, 2009

TODAY'S ACTION

We formed a force doji on a massive volume spike. I believe that we will see even greater spikes in volume. Typically, the doji is a 50/50 candle that basically shows the struggle between the bulls and bears. The volume was encouraging as it finally broke the tape's trend of dullness. We're no longer lolligag turtle fucking in this market. Excuse me, but I feel relieved of this.

Do I think the decline is over? No. I believe that this doji represents a pause in the decline. We'll see a short-term rally, but I can't imagine us shooting through the moon from this point on. That's ridiculous. We hit the technical 820 support level today, and that was the reason for the rally. Anyone who thinks that the banking crisis is all over because BAC just received this absurd bailout is a fool. We've been throwing hundreds of billions at this problem, but to no avail.

As for breadth, we made 173 new lows and 6 new highs. It is a deterioration of yesterday's NH-NL index, but it's acceptable given the bounce. We had a 2-to-1 advance-decline (A-D) line on the NYSE and a 1.5-to-1 A-D line on the NASDAQ. This is a typical reading for a doji suggesting that the bull/bear fight was a very close call.

If we gap up and stay up, we'll form a morning star reversal, a highly reliable signal, even if it's only for one more day. If we close lower, then it'll just be a continuation of the downtrend. Treat the doji as a meeting point, a battleground with a lot of idiotic confusion and indecision on both sides. A winner will be picked at the close later today.

Personally, I'd like to see some capitulation. Yesterday was not a capitulation day. The bulls do not have full control, and I would advise both sides to remain cautious. I personally have financial shorts that are hedged with FAS, so I could care less what happens tomorrow. Looking at several charts in a non-biased way, many stocks do exhibit reversal signals for the short-term.

We have CPI@ 8:30AM, Industrial Production@ 9:15AM, and Consumer Sentiment@ 10:00AM. In addition, we have earnings from BAC, C, SCHW, JCI, PPG and FHN.

Important levels (SPX):
Support - 838 (Initial), 820 (Major)
Resistance - 850 (Initial), 855, 862, 874

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

2 comments:

Anonymous said...

Hi john,,the obama catalyst should lift fwlt fslr ?

gil said...

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