THE DOT - if this turns orange or red be alert

Friday, August 14, 2009

Very good analysis from a good technician

Almost nothing I can add to this analysis except I do not agree on the NDX as I still think we will get an intermarket divergence which is a classic for big tops and troughs

Excerpt

August 14 2009 CNBC SQUAWKBOX EUROPE

LET’S LOOK AT THE S&P 500 INDEX DAILY CHART



We have been using the price zone of 1008 to 1053 as the price objective for this trend. The index has just butted up against that price zone. The best “time” for a high is August 22nd then September 9th both +- a day. The early September date is much more powerful. This consolidation has been tight or the range has been small indicating support at a high level. So another thrust up is possible.

Consensus or the number of bulls and bears has hit a level that indicates caution towards this trend. In fact consensus has hit a level that would turn the index down had it been in a bear trend. But since the index is not in a bear trend it can move higher against those readings. The early September date appears the stronger of the two. Remember this is a 5 year bear cycle and the low for that cycle will be the first week in January 2013 and will look very similar to the decade of the 1930s as shown on Squawk Box two weeks ago.

NOW LET’S LOOK AT THE NASDAQ



Last week I showed the amazing similarity to this index and the Dow from 1929 to 1942. Using that road map the price targets are 2150 to 2250. This index is still a distance from that objective while the S&P is just into the lower level of that zone. Either my calculations are wrong or there will be one last bit of speculation to drive the NASDAQ higher.

THE NEXT CHART IS THE DOLLAR INDEX



The dollar index is showing something unusual. You can see the first two legs down were vertical. This leg is currently struggling down with little downside momentum. There is a clear 5 wave structure down which can indicate a completed movement. Consensus in the dollar is at extremes with everyone bearish. Although consensus in currencies is not as reliable as stock indexes as extreme reading can go on for quite some time. The point I am trying to make is the form of this last leg down could be setting up as a significant low. Please understand there is nothing yet to confirm that scenario but we all need to keep an eye on currencies this next month or two.

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