Monday, September 06, 2010

Technical Picture - Markets Extend Recovery Rally

The weekly S&P chart above shows a bullish tweezer reversal and bullish engulfing bar following three consecutive higher closes Wednesday through Friday, not unlike the July low reversal.

Narrowing the view to the daily using the SPY, we see that last week's trend reversal was accompanied by two bullish gaps in response to better than expected economic data. Friday's jobs data was the first respectable report in four months. Price gapped up and rallied into the 10:00 hour, reversed for a half gap fill fill, before trending near the opening range highs in afternoon trade.

Looking ahead, initial resistance is the unfilled portion of the August 11th bearish gap, highlighted in pink, followed by the congestion zone at resistance in the $113.00 area. A healthy market needs the time to digest last week's gains before attempting to break higher.

$USD weakened as stocks strengthened. Testing first level support.

Financials rallied off their lows last week. GS finally decided to participate on Friday. GS rose to the top of the leader board in early trade. Using the RSI price bars helps pinpoint the best entry as depicted below. Unfortunately, the trade was stopped out on a sudden sharp retracement, well ahead of the target.

Continued strength in the Agchem sector approaching major resistance.

MON one of the weaker names in the Agchem sector, reversed in the ambush zone. As we can see from the 15 min. chart below, MON carved out an intraday C&H pattern. After gapping up Friday, it retested the base and rallied into the close.

I'm following this one closely, to see if it will break the downsloping trendline and participate in the sector rally.

AGCO (farm machinery) has carved out a C&H on the daily. It needs to consolidate last week's move before breaking out. Keep it on the Focus list.

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