Tuesday, October 28, 2008

The Indexes Grind Higher

Well, yesterday I suggested that the odds favored a break lower but I also indicated the developing divergences in the MCO and 10% Index. The MCO and 10% turned up sharply from yesterdays lows and the markets opened higher and held a positive tone for most of the day. In spite of an astoundingly negative Consumer Confidence number of 38, the worst since 1967, the markets managed to hold their gains rallying into the close. Also it snowed in New Jersey. Closing prices on the day.

Dow 9,065.12 + 889.35 (10.88%)
Nasdaq 1,649.47 + 143.57 (9.53%)
S&P 500 940.51 + 91.59 (10.79%

Since the markets obviously didn't break lower, this part of the decline is finished and I would expect the major indexes to move back up inside of the 15% envelope on the 200 day moving average. Since at the lows the indexes were 35% below the 200 day, the rally now occurring should provide some excitement for those still holding short positions. See the chart below for a general idea of the initial price targets.

The SPX daily chart with 15% Bands on the 200 Day MAVG
Click to Enlarge

The SPX 65 minute chart with positive divergences on the MACD and RSI
Click to Enlarge

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