WAS THAT THE TOP?
April 10, 2006
Did the markets put in a top this past Friday that ends the advance from the 2002 lows?
That is the question that many analysts will be tackling in the upcoming week or two.
On my last update, I was expressing that since the sentiment was so bearish including plenty of crash callers, that it was possible that the market had 1 more squeeze left it in it. I was looking for a move to 1285 and then a rally into new highs in April/May. The SPX has gone to 1292, and then put in a new high this past Friday. Has the setup completed? Honestly there is no confirmation of that yet. What we saw in the last few weeks might not be what seems like I was calling for. There still might be that move a bit lower to the 1285 area, and then still another high. It seems that we are in an Ending Diagonal pattern, with the type of choppy overlapping moves that occur within them. The unanswered question is, has the diagonal ended or is it a larger one? Below is a chart of the SPX showing both possibilities.
On the surface, it seems that the Ending diagonal we have been following played out nicely and the sharp drop on Friday fits with what should happen after its completion.
Once again, after only 1 day of a selloff, we have oversold conditions and traders screaming crash! Because of that same sentiment that keeps sending the markets to another high, I am not ready to call a top in yet. After Friday�s reversal, the next week or two will be extremely important and carefully watched. IF we were to find support at the 1285ish area, we could still be reaching for another high in the May/early June time frame.
My Target for the NYSE has now been satisfied, but the Dow Jones Composite is in need for that extra push. Many markets overseas have also reached their targets. Below is a FTSE chart showing a perfect hit of an Andrews Fork that was in place since its bottom. I'm sure Europe is keeping a close eye on the U.S. Markets, while we are keeping an eye on theirs.
In our Stock Forums, we are keeping an eye on stocks that may outperform when the general markets begin their long awaited pullbacks. Below is a chart of INTC showing a possible nice setup for a long swing position. A combination of Elliott Wave, Fibonacci, and Gann shows that we should find a low soon.
Other stocks we will start to watch are going to be the drug stocks. When the markets rollover soon, money will still stay active in groups that can outperform, the drugs should be one of them.
Within the commodities Forum, we are waiting for a low that may prove to be a lasting low with lots of upside. Corn seems to have put in that low and we will be looking to get long them on the next pullback into support.
Currencies soared in the face of many bearish analysts last week but anyone that followed a chart provided to us by Neowave wasn�t caught on the wrong side. Glenn Neely had been calling for a reversal up in the Euro and last weeks move confirmed his outlook that he had been providing his clients.
Periodic updates from others like Andre Gratian, Bob Carver, Larry Pesavento, Charts Edge, EWT, Elliott Today, Joe Ross and more, can be found in various forums at www.Tradingthecharts.com
Good luck to all with the important moves coming up in the next few weeks, and remember to always get confirmation and be sure to watch sentiment.
Dominick A.K.A. "spwaver"