Friday, October 30, 2009


Long before the SPX formed the 20/50-trap, most stocks formed what I call the "20/50-day churn" which is essentially the same thing except that we do not know if the SPX will churn. The only way to tell is if a lower high is made, and that is yet to be seen.

The trap is basically when a stock or the market tests the 50-day and then test the 20-day MA's, creating the possibility of continued narrow-ranged consolidation. The trap the turns into the churn if the range cannot be broken in it's entirety.

In the case of the SPX, a churn is bearish as it cannot form a higher high. If the SPX can bust through the 20-day and flag, it is likely going to make the attempt to test the high of the rally. I am and have remained mostly neutral on my stand on market direction.

On the char below marks the 20/50-day MA's. Also noe that we are forming an ascending broadening wedge within a larger rising wedge. In the first two corrections, the market was able to successfully bounce without the need for the 50-day. The past correction in the beginning of Oct required the 50-day. This correction needed further room lower. Make note of this trend as a mark of weakness.

I am still looking at my standard names such as AIG, but am also looking at CAR, NANO, NVTL, CROX, DAN, PVTB, CNXT for major reversals/continuations. I will mark trades if I take them.That is, if I make to campus before the open.

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