Tuesday, December 9, 2008

MCO update for Monday 12-9-08

The McClellan Oscillator is up in rarified territory again and it is unlikely it will go much higher. Over the next day or so we could see a pullback before resuming the upward move in the indexes. I cannot determine whether or not the correction will produce a sharp one day decline of just a day or so of choppy behavior.

The McClellan Oscillator for Monday 12/9/08
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The 65 minute DJIA Chart - Fibonacci Time Cycles
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Nothing special here, the DJIA continues to work it's way higher against a huge wall of worry. This chart updates the one in the previous posts to provide a check on how well the fibonacci time projections are working. The 610-233-89 nesting missed the low by 3 bars and was the start of the acceleration higher. The 60 is the nominal 10 trading day cycle which looks like it is inverting here or only strong enough to produce a minor correction. It's experimental enough to be fun to just watch but I wouldn't make bets on it.

Updated dialogue at 10:36
Waver said And note how price has broken above the various moving averages. They were resistance, but now the moving averages are support. At least, it reminds me of the charts of late 1929 to April 1, 1930.

Yes, that's what I think as well. It's option time coming up, plus any residual tax loss selling and an high MCO reading, so we could get a little pause here. It is very nice that the markets did not collapse 400 points right out of the chute today. Volatility is high so a 200 point correction is just a nervous jiggle (tell that to my stock george:-) but I'm encouraged here so far.

I really think this is a market one needs to step back, take a deep breath and look at closely to see what is really happening. Is it really the end of the world? Remembering that it always seems like the end of the world at the low, are we really seeing the total collapse of the capitalist system here, or just a major screw up and the pain that goes along with it?

If you look at individual stocks, a lot are down 50% to 80% from their highs of not just a year ago. I'm inclined to think that once again, the market is right and that it is doing what it needs to confuse the most people. The panic we have just experienced is enough to keep the majority waiting for a bottom 30% to 50% lower before they jump in and scoop up the bargains. This seems like a very obvious point of view to hold, how can it possibly be correct?

I think the momentum low has probably been established and that absolute price low may be in as well. If not, I seriously doubt we will make lower lows that are more than 10% lower than what we have just seen. There are some gaps and stuff, along with a need for a positive divergence in market breadth which keep me sanely cautious. But I think the superbears are going to be again proven really wrong.

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