ARE WE THERE YET?
March 18, 2006
Since the last update 5 weeks ago, the market has given us new highs. That update was written at the February lows, and my work was indicating that we had not yet reached a top in the markets. Since then, we have been screaming into highs not seen since 2001.
It wasn�t an easy road to get here, since the move from that low ran into a double top. From that high, we started to plunge into a low on March 8th. Once again, we took the stance that our targets were not yet reached and the sentiment was too negative for a top. From that low, this market has not given anyone trading against the trend a break.
Below is a chart that we had posted in our forum at Tradingthecharts.com, showing what we wanted to see in the weeks to come. We were pleased to see it work out so nicely and produce the new high as expected. This high might be also topping in a perfect turn window which was predicted from one of our members using his Delta Phenomenon methods.
So where do we go from here? The chart below shows that the NYSE target was touched today after waiting patiently for years. I'm expecting a reaction here and a turn in our markets. If this market was to keep going at this point, in no way would I want to want to short it as something much larger is happening. The move to this target has been so perfect that I don't see that happening at the moment.
The next chart is the Dow Jones Composite, showing its target which is 70 points above the market.
Around the world we also are reaching targets in the Dax and Ftse. Below is a Dax weekly chart. This week, the advance from the lows, will be equal to the decline from the 2000 highs.
As the markets once again are advancing to new highs, the sentiment this time seems to be different. It now seems that the public doesn't want to miss the train anymore. You can also sense from traders that were only trading to the downside, now are taking stabs at the long side. This is what we need to see when trying to look for a turn. With that said, I have seen many articles in the last few days claiming a crash is about to happen by Friday. Crashes usually don't make themselves known that easy and will take every penny from the bears before it turns down. Seems that may happen here before we are ready for a turn, which I will explain below.
Friday is option expiry and we will have the markets trading freely again on Monday. How the market behaves starting next week is where we will get our clues from. As of now, it seems as if we do need some little wiggles still within the count, that could produce a new high but it’s not a time to try and get every drop out of it now. This might be setting up to look like another mini 2000 top and unfortunately, many retail investors will get hurt again.
What do we need to see for confirmation of a turn? The first thing we want to do is get the S&P under 1285. It may want to vibrate around that area trying to find support, as a final try to move higher, but fails. From there, we start to decline in a very impulsive fashion. Confirmation would come in once we lose the 1247 area. Once at that area, I would expect some test of that region and a sharp decline when it loses that support. Leaving 1247 would convince me that a top was in.
There is a possibility that this market has one more squeeze left in it for the crash callers. If so, after putting in a high, we would get a sharp pullback that would have to find support around the 1285 area, and quickly run to new highs in April/May or the top will already be in place.
Dominick A.K.A. "spwaver"