SP500

Market Tops are not Made in One Day but Market Bottoms Are

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Today is another interesting day on Wall Street.  The Arms index hit a high today of close to 3.65 and tells me that today’s decline is most probably a one day oversold type event.  The market was very clearly in heavily overbought territory and very overdue for some type of pullback.  And so when any market gets in such a severe overbought level the smallest piece of news can be enough to get a big correction going.

How we close today will still be important as a setup going into next week.  If we close near the lows today then it could be a sign that next week will see some downside follow through.  On the other hand a decent end of day rally today may set the stage for a bounce next week to work off this oversold situation right now.

It is possible that this is a more significant top, but we will probably need another attempt at the highs for better confirmation.  So far the SP500 is still trading in a higher highs and higher lows type situation and until that changes I give the benefit of the doubt to the bulls.

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I can come up with a Million Reasons why the Market Should go Down

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But the problem is I am just a tiny water droplet and the market itself is an entire ocean.  The market could care less what I think and it will do exactly what it wants to do on its own time.

I have done a number of posts on what appear to be good reasons for a near term bearish resolution in price behavior for the sp500 and most other major broad market indices.  But despite that recent bias, I have to pinch myself and at least consider a bullish possibility for the market going into the long Easter holiday weekend.

By many measures the market is overbought.  But a market just being overbought is sometimes not enough of a reason for it to decline.  It can continue into ‘tilt mode’ overbought before any meaningful price reversal occurs.

The jobs report is coming out this Friday.  There will be no trading that day.  So whatever the results are of that report will have 3 full days to build up and stew over the long weekend.  That 3 day rest period before a market reaction usually leads to a very big opening move to start the following week.  And the market as of late has a very strong habit of being up on Mondays.

But everything seems to be relying on the interpretation of Friday’s jobs report.  Most of the news lately has been good news and it just seems to keep on coming, so why should this Friday be any different ?

I can speculate until I am blue in the face and will still not be able to figure out how the market will react on Monday of next week.

So here are the cold hard facts based on the chart:

sp50020100401 

The SP500 since early February has been in a very strong uptrend.  In early March it broke out above a significant resistance line with a moderate sign of strength and then attempted to retest the breakout area a few days later.

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The Market is looking Very Bullish Do Not Short this Market

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The SP500 has elected to break above the crucial 1116.56 level that I had alluded to several times before.  This is a very bullish development and now opens the door to expanding upside price action moving forward into 2010. I cannot recommend shorting this market now.  The risk reward is simply not there.  That is … Read more

Powerful Reversal in SP500 Candlestick Analysis says more Upside to Come

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The sp500 did a significant reversal today and it at least opens the door to a break north of the 1116.50 level I was alluding to yesterday.  Simply candlestick analysis shows that we did a reversal hammer and there is also a slight tendency towards a small head and shoulders bottoming formation in the sp500. … Read more