Market Strength – Afternoon Commentary Apr 16

Apr 16, 2007: 9:48 AM CST

The market is showing renowned strength over the last few sessions – my guess to the surprise of so many people.  I have been commenting that the technicals and price action ‘trump’ news and sentiment, and this is indeed the case.  With so many people openly bearish on the market, it is little surprise that the market continues to “confound the majority” and continue to rally with increased strength.

While it hasn’t happened yet, we are nearing all time highs again in the Dow, so this is to be watched and this area will absolutely serve to trigger a media frenzy should we make new lifetime highs on the Dow (which, ironically, will create new overwhelming optimism and bullishness, which … likely will lead to lower prices if sentiment strongly shifts to the bullish camp).

Here are a few daily charts updated as of 10:30 CST April 16th.

Here is a Swing Chart of the Dow (recall I mentioned earlier that we had high odds of ‘tagging’ the upper Keltner Channel and we achieved this).

dow-apr-16-swing.jpg

Here is a candle chart of the Dow (daily):

dow-apr-16.jpg

Observations:

  •  The short term trend (higher highs and higher lows) is still in tact and confirmed
  • The presence of the market at the Upper Keltner Channel (Swing Chart) and Bollinger Band (candle chart) say that odds favor a pullback
  • Clear momentum divergences are forming and could be confirmed with a price reversal or consolidation.
  • The Momentum Divergences are currently just a warning and NOT a call for shorting.
  • The market is making a new swing high on decreasing momentum.  Odds favor a slight pullback based on the “swing” structure of the price.
  • The Moving Averages are now in ‘bull’ mode with 20 over the 50 and both rising (indicating likely ‘support’ when the market retraces to them)
  • The Dow Average is merely 85 points away from lifetime highs – this area will bring great media spotlight if breached
  • Overall sentiment – as far as I can tell – is still negative on the market (probably a major factor for the rise)

The Swing Structure of the market is still behaving as expected and normally, with price surging and retracing in an orderly uptrend following the ‘shock’ decline.  We continue in ‘bull’ mode and odds favor long trades (buying) until we make a lower low or until we significantly breach our lower (rising) moving averages.

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