dexion10 (28.21)

dexion10's CAPS Blog

Technically Speaking - This chart shows the market needs to sell off

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January 06, 2009 – Comments (6) | RELATED TICKERS: SPY , TWM , TZA

Whether you are a bull or a bear you need this market to sell -off soon. It is technically more "overbought" than it has been in over a year and if my friend (who sent me the link) is right then we are more overbought than we've been in 3 years.

Specifically I am looking at the McClellan Oscillator (Chart #2).

LINK HERE: http://stockcharts.com/charts/indices/mcsumnyse.html

The McClellan indicator tells you that the market is "overbought" (in need of at least a brief decline) when it goes above 80. In the past year any readings near 75 have marked tops for the market and even if you were early in shorting the market you didn't lose much because the market struggled to go higher before it eventually went lower.

Also there is some good news for the bulls (though I doubt it will last much longer) the NYSE summation chart ( Chart #3) is like a traders bible it confirms the trend (lagging indicator). The NYSE summation had confirmed the bull move a long time ago.

When it changes direction from down to up - it tells traders to buy the dips going forward when it changes from up to down it tells traders to rallies. Another interesting thing about the NYSE summation is that it seems that the dots have a wide spread in them during blow off tops or capitulation bottoms.

We now see that we have a wide spread in the dots which to me looks like past blow off tops. In short I think the end of this rally is very near.

MY EXPECTATION:

My expecation is that we'll sell off prior to the jobs number on Friday... but keep in mind we've rallied on the past 6 jobs reports and sold off ahead of most of them.

6 Comments – Post Your Own

#1) On January 06, 2009 at 11:46 AM, JakilaTheHun (99.94) wrote:

I keep expecting the short-term pullback, as well.

I don't see much of a way to play it here on CAPS, short of using levered funds mimicking the Dow or S&P. I'm a bit too afraid to risk shorting a double long when the DJIA is at 9,000, though.

For my fantasy portfolio on Facebook, I decided to start a hedge today by putting 4% of my portfolio value in a short of IYY.

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#2) On January 06, 2009 at 12:33 PM, dexion10 (28.21) wrote:

The Huney... the pullback may be only a brief event so I understand your concern totally... after the pullback begins my toughest decision is how far to go before I do some partial covering of my shorts?

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#3) On January 06, 2009 at 12:34 PM, dexion10 (28.21) wrote:

Here is a clickable link to the charts... apologies I didn't make it clickable earlier

LINK TO CHART

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#4) On January 06, 2009 at 12:47 PM, awallejr (84.45) wrote:

Not that I am much of a "chartist" but just looking at those seems to depict as if the trend still remains higher. I'm going to make a prediction because what the hell I can here. I think the rally goes to May then it falls. "Sell in May and Go Away" thesis. Man wish I listened to that last year;/

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#5) On January 06, 2009 at 3:33 PM, dexion10 (28.21) wrote:

awallejr -

This rally is impressing me... it hurts to watch this so I don't blame you for going with the trend it's been impressive.

I can't chase after a market that moves like this though... especially now that it is slowing down.

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#6) On January 06, 2009 at 7:37 PM, awallejr (84.45) wrote:

Actually it is going to be interesting as we near the release of 4Q GDP numbers come 1/30. I could see a run up to around inauguration day, then a drop down as a reaction to what WILL be a horrible GDP release, then a rally back to May then "go away" until December again. But then again if the market continues its way back up even after GDP release then who knows, maybe the worse will be behind (tho I can't see it until banks stop writing off debt).

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