Great Trades

This updated chart of the TICK 10-day EMA shows that, with today's breakout rally, it has moved well above 700, much higher than any reading in the last couple of years. If we get a short pullback like the last 6 times it peaked over 600, the second day could again be a great buying opportunity.

If the next pullback holds the 950 area, or even the 927-930 area, it would be bullish for a continued rally to higher levels. Given today's Dow Transports confirmation of the Dow Theory Bull Signal, we'll see next week if indeed such a pullback proves to be a great buying opportunity.


Here's the updated TICK 10-day EMA chart, along with the S&P 500 underneath:


As expected, we got a short pullback last week, and the second pullback day was again a great buying opportunity. The pullback not only held the 950 area, but actually held the 970 area, as dip buyers were out in force. As Friday's small NYMO change indicated, we got a big move day today, closing above the 1000 level.

With this rally, the TICK 10-day EMA is back above 600 again. It has room to go higher, but once it peaks, we should see at least a short-term pullback like the last 7 times it peaked over 600 since March. Previous peaks over 600 have led to more significant down moves (e.g., late August '08 and early January '09).

If the next pullback holds the 970 area, it would be bullish for a continued rally to higher levels. If we get a short pullback like the last 7 times it peaked over 600, the second day could again be a great buying opportunity. If that pattern breaks, and the market continues lower after 2 days on the next pullback, it should signal a deeper correction.