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Monday, August 15, 2011

Counter-Current Rally

The DJI was up almost 2% today, and the SP500 was up almost 2.2%.  Both gapped up at the opening, and finished the day on a high note.  Pretty impressive, no?


I was only planning on posting charts on Fridays, but Yahoo's basic chart function has a limited number of short windows: 1 day and 5 days.  So this is my last chance to get last Tuesday in before it's lost - and I thought this was pretty interesting.   By my reckoning, the current up move is a wave 4, and today's SP500 high of 1204.49 is right at the 50% retracement level of wave 3 down.

I've indicated an upward sloping trend channel from last Tuesday's low.  Movement has been sideways, then a jump up, rinse and repeat.  For now, the moves are enough to keep the trading range comfortably in the top half of the trading channel.  The first jump was about 30 points, the second was 10 to 15.  This is momentum being spent.  On the Yahoo interactive daily chart, 26,12,9 (I assume minutes) MACD flopped down by 11:00 a.m., and has since more or less flat-lined for the remainder of the day - despite the steady advance of the index.

I added some potential support-resistance lines to the chart, for intraday moves. The lowest of these is at about 1190, and the channel midline (orange) will cross it tomorrow.  That will be fun to watch. A significant bump beyond 1205 means the 50% retracement line didn't hold, with the next milestone at 62% (1229-1230.)  It could also mean I've got this all wrong.  But volume is thinning out, compared to last week (see bottom of the chart,) and that's consistent with waning momentum.

At any rate, this is wave 4, and wave 5 down is waiting in the wings.

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