Monday, August 29, 2011

Second bullish day in a row

SPX advanced a lot today but closed bellow a level I keep mentioning, SMA 75 on weekly chart, that is now around 1,215, so on long term market remains bearish. On short and intermediate time frames market turned bullish. Actually I am not too sure about the intermediate time frame. I am tempted to consider mostly the pair of EMAs that worked very well in the last few years (those on hourly chart) but I can't forget that in the last 3-4 months I've got whip-sawed a few times, the reason I switched to 2 hour chart.

On two hour chart EMA 25 is very close to EMA 50 but I don't see any crossing yet. Until I see one I prefer to stay cautiously bullish on the intermediate time frame. If the rally is for real we are going to see this confirmation plus, daily and weekly DMI turning positive.

On longer time frames things looks less bullish. Daily chart shows that market made a higher high but not by much so I don't consider this extremely significant. Even more, as I mentioned above, daily DMI continues to be negative.

Weekly chart shows EMA 20 touching EMA 40 for the first time since March 2009. This looks pretty scary to me and this is the reason why I am not so bullish overall.

Once again, have a look at what happened in 2007-2008. There were two major failed attempts to climb above SMA 75, one rally lasted almost 3 months and all this time DMI was negative.

Bulls seem to be extremely enthusiastic about another quantitative easing but this is just a possibility, not a fact. Until that moment we are going to see (most likely) a trading in a range that remains to be established (if you ask me I would say between 1120 and 1215).

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