Purely Technical Nightly Commentary - Tuesday
, Mar 20 '07:
Today might have seemed like a quiet day on the stock markets, but it is only the calm before the storm. Virtually every indicator has "reset" on the all-important S&P 500, which means that it is anyone's game at this point. The bulls and bears have exactly the same odds of gaining a stranglehold and the one thing that is nearly guaranteed is that a strong move on the minor trend begins right here.
Let's run through what the indicators are showing us on the chart...
The Bollinger Bands had reached an extreme width last week; when this happens, it is often a sign that the relevant trend has possibly pushed itself too far and needs to take a breather. CMF is currently a tad below its 0-line; a move back above it will signal that buying pressure is growing.
RSI is now sitting precisely on its centerline; a conclusive move above that line confirms that the bulls are in charge of the market. However, until such a positive centerline crossover occurs, one needs to assume that this return to the 50-line is only an act of "resetting" the indicator in order to provide room for the next decline. Remember, we did not see a positive divergence at the lows seen over the first half of this month.
MACD, for its part, is showing the first sign of an effort by the bulls to turn this thing around. That sign is in the form of a positive MA crossover. However, as any technician knows, a positive MA crossover is at best a weak buy signal and one would need to see several other signs, such as a positive 0-line crossover, before momentum can be said to be with the bulls once again.
(If you are not able to read the chart below, please click on the chart in order to access a larger version)
Price, itself, is also showing signs of a bullish reversal. A minor crossing of the 20-day Moving Average has occurred today and, possibly more significantly, a move above an important short-term support/resistance level at 1408.
All in all, the bulls have now brought the ball to the half-line and at this point it is anyone's game. We shall soon see which team breaks the tie. There will be a lot of new opportunities once that stalemate has been settled and should provide us with some entertaining trading setups for the next few weeks.
Our stock picks lists have been kept short over the past few weeks. This was a direct result of the fact that many charts were just not showing clear signs of breaking out in one direction or the other and we decided to wait until they did so. Those lists should fill up quickly over the coming days, if we get the sharp short-term move that the markets are telling us to expect.
Tomorrow evening, we'll take a look at major developments on the charts elsewhere.
Until then, have a great trading day!
Asher Pinto
TheMarketMessenger.com
Disclaimer: