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While my inclination is to the bearish side due to the lack of a w.5 bottom
in the NASDAQ and the almost parabolic rally in the NYSE and DJIA, I am
overall quite cautious. The reversal in the DJIA, SP500, and NYSE has been
strong enough to complete a monthly spring reversal where the monthly bar
which closed below the Oct00 low has been completely reversed and exceeded
in a single bar - this is a powerful move. Toss in a healthy looking move in
the small and mid cap indexes and I see a rally which carries some
credibility. What I am seeing is negative breadth divergences in the NYSE,
however this is to be expected given the size of the move up. The NASDAQ
appears to me to be a bit weaker and rolling over and this weakness is
confirmed by myn NASDAQ breadth models.
In trading the S&P futures, I have (so far) noticed a reluctance to decline
smoothly. What we may be seeing here is a second (and weaker) replay of last
fall's action where the NYSE wanted to go up as the NASDAQ wanted to head
down. In the second act, however we have a NASDAQ which has lost a fair
portion of its downward momentum. Further, there seems to be some
irregularity in the S&P and NASDAQ time cycles. All in all, I'm thinking we
are in for a choppy decline in light summer volume.
Earl
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