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Monday, October 4, 2010

So you want to be a bull?

Just for all those bears that have recently turned bullish, or were thinking about it, the SPX weekly chart is showing that things might not be so rosy after all. In reality the majority of the indicators are going bearish. The RSI has now rolled over and with-out being able to make a higher high has created another down channel VERY similar to the one from the sell-off that started back in '08 when the SPX was at its peak, notice how all the red arrows line directly up with all the very important tops. Besides the RSI, the STO has peaked, and rolled over along with the 5/35 histogram and both are now trending down. The only difference between '08 sell-off and now, all the major weekly moving averages are now in perfect bearish alignment.

3 comments:

  1. With all due respect, I think that you are simply looking to "fit" your bearish bias onto the charts. The position of the RSI is no different than it was in January of this year, before it rolled over (without making a higher high). The market then went on to a huge rally in February to a higher high, did it not???

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  2. michael, i normally share the same concern that you stated. a couple things look different to me than january. the RSI was in a well-defined up channel at that time and the MACD histogram flat and falling, which i think set the stage for the nice february rally shortly thereafter. this time, we are still in a pretty well defined downtrend in the RSI and the MSCD histogram is positive and falling, which to me implies it has a bit of downside before it will reverse.

    i consider myself bullish in general now and i expect the RSI downtrend to be broken and identify a new uptrend by the end of the month or at least later this year. but, for now, it seems likely that the near term picture looks downish, which is needed to correct for the large rally we have had and should set the foundation for the next run up...just my opinion of course.

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