Wed 13 Sep 2006
Today’s move in stocks is pretty bullish in terms of density theory.? A quick whip from one side of the bell curve to the other or a fast rejection of the last major value level, all followd by a breakout seems to be something you see ahead of major moves to new levels.? This certainly lends support to the more bullish signals given in models like those at CXO Advisory.? There isn’t any major stopping point to the north other than the year’s high so a retest is looking mighty likely.? Stay tuned…
September 13th, 2006 at 6:48 pm
Which market are you looking at (Dow or S&P)? I have a feeling that it would be a bit different looking at NDX or COMPQ… the Nasdaq still has about 8.5% to go to reach its 52 week high.
September 13th, 2006 at 7:04 pm
Yes, it does often matter what index you talk about but in this case there is a congruence of “open space” and a similar pattern across all the indexes. Some are certainly more pronounced than others.
I should also note that a failure to keep this up would be an even stronger signal in the opposite direction. Breakout failures often are more violent than the breakouts themselves.
September 19th, 2006 at 2:32 pm
It looks like it was indeed a headfake. This is why I don’t like short-term market timing. Anyway, it is interesting to note that this same pattern has played out over and over again over the past few months but the result has been gradually higher highs and higher lows and I’m not sure people have noticed it. Basically, a small, technically perfect bull market has formed inside of the larger trading range. Since July 18th, nothing has been bearish about the market’s behavior. I don’t say this to support a bull theory for the future. I only mean to comment on what has already occured. I find it funny that during that entire time, I don’t remember much other than negative spin. But then again, it’s hard for me to judge if the spin I read is systemically biased so that isn’t really a good measure.
I’ll be interested to see if a new higher low forms or if we will get some “real” selling that breaks down this staircase we’ve been climbing.? But no matter what, we are falling back into the bell curve for now.
September 20th, 2006 at 7:21 am
You’re absolutely right, we’ve seen some rather good market behavior with very little bullish response from the market population at large, or the commentators.
Many sentiment indicators (CPC, AAII investor surveys, even the Blogger Sentiment Poll) have all been excessively bearish considering the price action.
You could read this in either direction — overly bearish sentiment typically precedes bullish price action… but then this could also be a sentiment shift. We shall have to wait and see…