Tuesday, October 28, 2008

NASDAQ Technical Picture - Bulls Own It - Short Squeeze Edition

Yesterday, we said that the low volume break of the bearish pennant foreshadowed a fake out. Today's bullish wide range reversal, confirms the fake out. Is that a near-term bottom? It could be, but we need high volume, follow through in order to be sure.

The markets gapped up on overseas strength, however, the mood quickly changed following a weaker than expected consumer confidence report at 10:00. A sharp retracement ensued with a retest of yesterday's lows for the broader market and a higher low for the NASDAQ. Low volume, range trade followed into midday with a series of minor higher highs and lows. A 50% Fib. retracement and test of the trendline preceded the bullish reversal. Prices took out recent resistance, retested and set off a short squeeze into the last hour.

Today's movement came from higher than avg. volume (NYSE 1662, vs. closing avg of 1434; Nasdaq 2854, vs. 2396), with advancers outpacing decliners (NYSE 4:1; Nasdaq 2:1). The rally was broad based with Oil, gold, metals, banks, and retail pacing the way. The laggards on my WL were dry bulk shippers. DRYS is trading at $14.00, down from $116.00 in 5 1/2 months.

Watch the bearish gaps (highlighted in pink) as areas of potential resistance. Crude inventories at 10:35 and FOMC minutes at 2:15 EST.

The $USD is finally poised for a technical retracement and tomorrow's expected FED int. rate cut could be the trigger.

What is the impact of a retracement in the $USD? The strong dollar has caused a sharp reversal in commodities and gold. A retracement in the dollar will be a boost to these beaten down sectors.


anarco said...

Hi Jamie~
You nightly analysis of the market helps me a lot in viewing the broader picture for next session. In fact, today, I remembered throughout the session your head fake call from last night, and that was really useful.
One question: is there a way to monitor the dollar in eSignal without having access to futures, etc?

Jamie said...

Thanks Anarco,

In Esignal try the powershares for the $USD - UUP (bull) and UDN (bear)