THE DOT - if this turns orange or red be alert

Tuesday, September 16, 2008

final stage of the slump (this leg) ? - capitulation?

Finally, we have reached the levels and the behavior we were looking for. The SPX dipped below 1200 with a combo 10 count, hence we need to have 2 lower closes of at least to the 50% retracement level for the 2002/07 rally at 1174. Around 1180, we should get a temporary bottom now with the VIX at appropriate levels at 31.7%, it may rise close to 35 this week.
Most importantly, since it's the crucial sector, XBD reached the 120 level and counts a weekly TDCOMBO 13 with a daily 11, so we should get this week a severe temporary low below 120 for Brokers - not many left though…

NDX very likely will test its March low at 1670 before bouncing, but we better get back over the 200 week MA soon at 1740 (likely) and stay there.

Within 4-5 months, we will go another 10% lower but now we are up for an up to 10% bounce, after having marked the lows and the SPX could test the 1300 level again. But we should get excited about upside moves for the time being - they are basically opportunities to sell. It will be different in Q1 2009, with a longer upside leg at hand for a few months - we might see an upside consolidation. The whole situation is like a cancer and spreads to other organs, currently other sectors of the world economy. The earnings picture will worsen going forward, also for non-financial sectors. The markets will have to adjust their price levels going forward.

China has reached our 2000 target and may be a good opportunity short term out-performing others - I will make a special on that this week.

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