Great Trades

Great stock trades based on fundamentals and technical analysis.

Tuesday, October 27, 2009


Another market dip, or trend change?

The dip in the S&P 500 we mentioned last time did indeed prove to be a buying opportunity. However, unlike the previous 9 times the market rallied back from a short-term pullback after the TICK 10-day EMA peaked over 600, this time that 10-day EMA has not reached the 600 level on the rally back to a new high. That could mean this dip will take longer, like the June/July dip, or it could mean the trend will change. As this chart shows, the TICK 10-day EMA is below 0 for the first time since the June/July dip (though it has room to move lower):

Each time the NYSE McClellan Oscillator (NYMO) has dropped to this area during this rally, the market has rallied back to make a new high. If this rally is to continue without a more significant correction, it should do the same once again:

As this weekly chart shows, the S&P 500 has been trending higher since March with a bearish divergence on PPO, just as it had been trending lower into March with a bullish divergence:

Watch for a bearish cross on the weekly PPO and a break of the weekly uptrend to signal a more significant market correction. If the TICK 10-day EMA can't reach the 600 level on the next bounce, or the market fails to sustain a rally from oversold NYMO levels, the medium-term trend could be changing.

Gold has continued its breakout action, moving as high as $1070 before backtesting the previous all-time high level in the 1030-1040 area. Gold bulls will want to see a successful backtest followed by a breakout to new highs:

We continue to test our futures trading system across different markets. We await a significant downward correction in the stock market to see how our various programs perform under those conditions.

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Disclaimer: Great Trades may have a position in all or some of the stocks discussed in this blog, but is not paid by any company to promote their stock. Great Trades contains opinions, none of which constitute a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. Great Trades does not provide personalized investment advice.

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