Saturday, June 26, 2010

Week-End Summary

We had a shortfall week. 4 red days in a row indicate clear bear market. Sentiment fell from highs to extra lows, some guys envision 3rd world war.
Others shout 'long and strong' with no explanation. Also there is a fear about magic 200/50 MA cross signaling end of the world as an absolute bearish signal. It's a false statement it can also lead to a longer-term side way move. Retail participants are confused and hesitate, or make risky buy-the dip jeopardizing their wealth. Having any kind of emotion is not professional.

So, now our task to put  our emotions aside and observe.
Market has no emotions, it has direction only. If we bet against it, we fail, if we ride it, we win.

Market status:

As it's shown above, SPX needs to push through on upper cloud straight, without any hesitation in order to reach safe bull zone. This situation is similar to 2005 may-july and 2006 jun-aug. Then market achieved success with  producing a small upper and a bigger, lower target cloud, finally resulted a lower-cloud push-through bear elimination. We don't have that  tolerance now.
We have a critical dow-theory signal at 1040 suggests and immediate bull liquidation with no further tolerance.

At least once a week we should set up mental stops, danger zones, targets and relief zones. This activity helps us to make main decision on busy weekdays. We will use the chart above for that purpose.

Market is in a danger zone. 1040 is an immediate liquidation point.
SPX should go above 1092 and should be kept as a support. That will signal us further chance for bull recovery. There is a high probability to reach that level next week.
In order to have a hope in a confirmed bull market, we should have SPX 1130. This is not a mission impossible scenario, it just happened a week before to have a 60+ more point gain. And now we are at 1076, so we need 54 points of advance.

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