Wednesday, May 6, 2009

Market Technical Analysis

Did we hit the bottom or indices are going to roll over again?
This the question many investors are asking themselves these days, but nobody knows if the March 6th low, was the bottom or not?
Bulls would say yeah that was the bottom, but from technical perspective March 6th low did not have the characteristics of usual bottoms, therefore I will remain skeptical. I would not go over fundamentals this time, but you can read my post "What's Wrong With The U.S. Economy".
Here is the link:

I try to analyse the market from technical prospective:

Positive signs:
1) 20&50 SMA are rising and indices are making higher high and lower high.
2) Over 92% of stocks in NYSE are above 50 SMA and 42% are above 200 SMA.

NYSE stocks above 200 SMA:
Things to be concern:
1) +30% rally in 9 weeks with no pull back, make this rally a "dead cat bounce".
2) All indicators scream overbought in the past 4 weeks. As I said many times before, indices could not stay overbought for a long time in bear markets.
3)Volume is diminishing as we go higher and higher.
4)Indices are moving in very tight channels which mostly break lower.
5)With the exception of NASDAQ all indices are below 200 SMA & EMA.

In the eyes of many analysts this rally is over done and we are going to roll over very soon. I think indices could shoot up to 200 SMA and roll over.
On the other hand if indices stay above 200 SMA I will go long.