Thursday, January 12, 2012

Market at Price and Time Resistance

In November I showed some time projections for bear market rallies and mentioned that since 2000, the average bear market rally has been about 62% in time of the average declining leg.  We have just surpassed that time frame in our current market.

With a slight new high above the Oct high in the S&P 500, and the S&P 500 at 1295 which has been repeated horizontal support and resistance, this will be a defining level for whether the trend is up or still down.  Also the 78.6% retracement of the May-Oct decline is just overhead, and downtrending move will typically not retrace more than that.

 The chart above shows that the weekly stochastics is overbought.  There is bearish divergence on the shorter time frame RSI compared to the Oct high.  If the downtrend is to resume, there should not be more than a brief break of the Oct high.  If an uptrend is developing, then we may see a pullback prior to a break to new highs yet again.

The daily ADX/DMI on the Dow 30 is starting to shape up like an uptrend.  However, the textbook signal of an uptrend is when the ADX turns up above 20, which it is not yet.  However, several more days will put it there.  So again, we are at a defining point in the next few days here.

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