Monday, March 9, 2009


The market was flagging all day long in a downward channel. As a multi-day/week holder of shorts and cash, the actual shape of the channel and 2-day flag/flagpole means a lot to me. In fact, the last few minutes should have determined a highly likely scenario for the next day, but it looked 50/50 to me. I simply saw no rush to "load up on longs".

Mathematically, slopes have very high importance to the technical flag pattern. I'd say that today's flag had a negative slope of around -0.60. For me to give consideration to a potential Spiker play, I like to see a slope of between 0 and -0.30, and no positive slopes. Deeply negative-sloping flags increase the chances for failure to the downside. In addition, the length of the flag is also critical. I will give the market one more day to figure it all out.

Not only that, we are in a very slow and boring measured move down on the 1-month/60-min chart. We are still in a downward move until there is a force spike to the upside well above the upper area of the channel. What's interesting to note is the dried up volume today. Compare today with the past several weeks. It confirms that we are temporarily consolidating here.

Another interesting note is that the COMP has finally caught up with it's brothers and is making the habit of making new lows on a daily basis. This was a divergence several weeks ago when the COMP was noticeably outperforming the SPX, which was falling off a cliff. Today's COMP close is entirely under the November intra-day low, an intermediate-term breakdown.

Something to think about: during the Dot-Com crash, the COMP lost -83% during 3/00-10/02. If you round up all the S&P financials, they lost -84% from 2/07-3/09.

The "Crisis Map"

As you can see, Africa was so destitute they actually dodged most of the crisis. This is the only time where being dirt poor can be a good thing.

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

1 comment:

Bob said...

Thanks John, looks good. Appreciate the explanations of what you see.