Wednesday, March 21, 2012

Do you agree with this market?

The price action in the market averages continue to climb higher on ligher volume because the retailer becomes more selective in each individual purchase of stock. To say the least, Apple is the fundamental driver of the current stance of the marketplace, and will continue to be until this parabolic move breaks. At that point, we can safely say that the retail investor will question the fundamentals of the marketplace, then begin liquidating their portfolios. If you could chose a stock better than Apple, what would it be, and would others buy that same stock? The liquidating process will take in the form of a domino effect until enough fear in the market can establish the next stock market bottom.

Apple- Daily Chart

As oversold as the metal has become, I wouldn't be surprised to see a bounce from here. The four hour chart that you see below gives a more accurate measure of price action for both intra-day and daily time frames. If you notice, each swing low is becoming less dramatic, which indicates that the sellers of gold are diminishing in the short-term. Do take in mind that prices still may want to go slightly lower before establishing a short-term bottom.

GLD- Four Hour Chart

The U.S. Dollar appears to be backtesting the recent breakout resistance level at 79.30-79.50. Once prices re-visit this level, buyers will find attractive entry points during this intermediate uptrend. The buying pressure can be better defined by the type of candlesticks that form during each pullback.Today's candlestick is known as a spinning top, which often mark reversals when are formed at an establish support level. However, confirmation of the candlesitck cannot be validated unless a confirming close above the intra-day high of tady's session takes place. That particular level is 79.83 and will be something I'm watching for.

The U.S. Dollar- Daily Chart

I've said it before, and I'll say it again. I believe the market is carving out the Head of a Head and Shoulders Top. Do understand that it takes time for these patterns to fully play out. Plus, following a multi-month rally in stocks, it only makes sense to look for a topping pattern given the overbought and diverging indicators that you see in the chart below.

S&P 500 Daily Chart
Finally, stocks making new highs does not seem to agree with the price action of the overall market. This particular internal indicator reveals the anatomy of stocks within the stock market averages. The chart below reveals a notable divergence of stocks making new highs from the October peak.

The High-Low Index

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  1. Good presentation and quite apt for your premium newsletter.Perhaps you could also add in DOW and wilshire analysis too in your daily newsletter.That would give an overall picture in the macro sense as to where we are headed.

  2. hanks for a marvelous posting! I quite enjoyed reading it, you might India share market be a great researcher