Sunday, November 23, 2008

Technical Picture - Technical Bounce Coming Soon

Thursday night we said that the S&P needed to close the week above the 2002 lows. That was accomplished with a psychologically significant close on 800, well above the threshold 2002 lows, and a 60 pt. move from intraday lows. The strong, late session rally was attributed to reports of Obama treasury pick, Tim Geithner. Still, with more announcements set for tomorrow and reports of possible tax hike deferrals, we could see some confidence building as Obama and the new team take center stage over the Bush debacle.

We need follow through , more than we got on the Nov. 13-14 bounce to temporarily knock down the bears and begin a real bear market bounce (multi week correction). As you can see from the charts below, for the most part, we see some positive divergence creeping in which suggests a correction is coming very soon.

Economic Calendar: Existing Home Sales at 10:00 EST

The VIX still looks like it wants to break down from this extended flag pattern.

The SOX looks like it wants to start to retrace here as we see positive divergence of the MACD to lower prices.
Energy snapped back sharply on Friday, hinting of a false BO. As noted in previous post, Gold did not break Oct. lows and was up sharply on Friday. So we wait patiently for the $USD to soften so that energy/commodities can put together a retracement back up to the top of recent trading range.

$USD has been basing at resistance following a bullish pennant BO. As noted previously, the pennant BO is unconfirmed by MACD which makes it suspect. We now see a hanging man and await confirmation of a pullback.

The $CAD has carved out a double bottom and looks poised to bounce - positive divergence of the RSI to equal prices.

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