Wednesday, April 15, 2009

Technicals - All That Seems to Matter

For me, another very frustrating day in the markets. We looked like we were going to break and again, the market got pushed higher. It is not that I am majorly bearish and think we are going to break new lows anytime soon, because I don't but it is hard to buy anything after a massive rally like we have. So smart investing says you wait for a break and a pull back. So far it ain't happenin.

Every now and then I will show a graph and very simple technical relationship that shouldn't matter but it occasionally is all that matters. Today you get such a graph.

So this graph show the S&P since the bottom. We are following a very distinct trendline. Traders step and buy when you get close to that trendline. These traders maintain very tight stops so that if you ever break that trendline, you go down sharp and hard. Today we tried to break, again, and failed, again. Once we break you probably have a reasonably quick pullback to 800, 780, or even 750. I think you have to be buying on that break. In the interim you just have to bleed until the drop finally happens.

You can see that the rally is tiring as the upper trendline has slowed its trajectory. I was hoping we could just hold today, rally tomorrow, and then really break on Friday with options expiration and what I think will be a goose egg by General Electric. Instead, tomorrow we could explode higher after holding the trend line today and if JP Morgan's numbers are good (they will be), housing inventory drops (probable) and the Philly Fed Index looks good (likely). If we get above 855 I would guess with high level of confidence we will see 870 quickly.

Worthless stuff as it relates to the long term, but in the short term, sometimes it is all that matters.

No comments: