Monday, October 25, 2010

Technical Picture - New Multi-Month Highs

Early strength peaked about 30 minutes into the session. The DOW did not confirm a new recovery high as per the DOW Transports. As depicted on the chart above, we were about 10 pts. shy of the April high. Non-confirmation often precedes a pullback.

The second point of interest is the weekly chart of the S&P. Here we have the 200 SMA acting as resistance. Too early to tell if this is significant.

The SPY daily is just shy of the 62% Fib. extension of the June-Sept. base.

In order to continue higher, we need some participation from steel and financials. Steel is more likely than financials, as the banks looked poised to break down from bearish flag pattern.

Oil has carved out a solid base and continued weakness in the $USD could see oil retest recovery highs.
The chart below is a weekly chart of the $USD. So far the lower trendline is holding, but if it gives way, we have a very important pivot at $74.00 (red arrows), which will likely result in an oversold bounce.

The longer term forecast for the $USD is nebulous given the lack of details and potential impact of QE2 easing.

IBM is setting up an ambush short. Price retraced 62% of the reaction leg lower following earnings. Failure to close above the 62% Fib. level leaves the door open to some selling. Intra-day trendline was breached going into the close today.

SNDK - Failure to break and hold above the base, followed by a retracement back to lower trendline post earnings, looks bearish.

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