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Monday, January 24, 2011

Monday, After the Close, What Happened to the Bears?

The Dollar Index hit the 61.8% retracement level today, this would be a good spot for a reversal, also the STO is nearing extreme over-sold conditions and should start rolling over here soon. The Fib fans are painting a different scenario with the Dollar in the middle of the bearish fans and trending downwards with no bullish fans for support.
The Baltic Dry Index, BDI, is a lost cause now with very little trendline or previous lows for support before a test of the lows occurs.

This is the third trading day in a row that the bears did not come thru and push the SPX lower, this lack of follow-thru to the downside should be troubling for the bears, and if they cannot get their act together, new highs are in the immediate future. The Russell and the Dow transports have been following thru, and both made new lows today, however, the Dow made new highs. The amount of divergences between the major indexes continues to grow and that would be expected at a major turning point as the various markets roll-over at different times into a new trend, this pattern is more common at tops, compared to bottoms which normally are sharp reversals. The SPX and the NDX both seem stuck in the middle, unable to make higher highs, or lower lows.

The RSI and the STO on this hourly chart are reaching over-bought levels, but there is still room left for the SPX to make a new high, and still keep the longer-term divergence going on the indicators. Also resistance from the black lower channel line is not low enough to keep the SPX from making a new high. The bears need the SPX to solidly break-thru the heavier green lower channel line of support for any hope of seeing some decent downside, other-wise the odds are going to start favoring the bulls.

Breadth for the day was a little stronger then we have seen for the last three days, but still not much to write home about, closing at 2.57:1, advancers, on anemic volume once again, only 956M shares traded on the NYSE.

Maybe the market movers will slowly run this up thru tomorrow for Obama's State of the Union address, then we start a large sell-off first thing Wednesday morning. the same sell-the-news event, that we have been seeing thru-out this earnings season.

The Trend Finder II is updated.


  1. Michael just a word about the BDI: in the couple of years before the financial crisis when dry shipping rates were running very high, lots of new ships were ordered in the belief that these would be very profitable. Obviously it takes two or three years to build a ship. Now all those new ships are coming into service. In other words the BDI doesn't necessarily reflect world economic health, but on this occasion might simply reflect the fact that there are now 'too many ships'.

  2. Hey David, but on the flip-side of the coin, they have reduced their speed to save fuel costs, so it takes more vessels to move the same amount of cargo, at the same time.

  3. What happened to bears?
    Where are bears? Market goes down when the big guys decide to take profits and then the dip is bought.

  4. I advise that you pick the #1 Forex broker - AvaTrade.