THE DOT - if this turns orange or red be alert

Wednesday, July 9, 2008

Technical update - next week we get the interim low??

As expected in our time frame (low in July 2/3 week), we should get now the July low by next week. Only one thing is missing, a VIX at or above 30. However, as I get to read more and more calls for that, I tend to think we might turn close to 30. The Investor Intelligence numbers are at extreme readings of 27.4 bulls and 47.3 bears this week, rydex was at .61 - not to mention that all of the indicators showing oversold readings - but not in an absolute context. We have, by no means, reached the levels of October 2002 or March 2003, this is just the end of the current wave.

There is plenty more downside ahead in the next 18-24 months. Oil has made the expected top at 146/8 area and is now heading for 100/10 area.

DOW made a combo 13 daily and a week 9 (next week), which is the basic count for a countertrend rally.

Yet the major driver XBD is still in week 11 and we need another lower week, next week to get the capitulation at 12 respectively 13 count the week after. Also, some price targets are not entirely reached the NDX should dip to 1780 and the DOWs to 10800 (10700 is 50% retracement). The big support for the SPX is around 1225 (1175 is a sellout target and 50%) and VIX should come close to 30 at least a 28-9 reading next week. A capitulation in Tech is very likely since that was the long bet most recommended and a test of 1700 is even possible.

Putting it into proportion, a drop of another 2% (minimum)-5 % in some indices is required for the capitulation and the VIX to reach 28 at least. Next week's full moon is on the day of the MER earnings announcement with some capital raising initiatives and Citi could be ugly as well.


No comments:

About Me

I am a professional independent trader