Friday, May 1, 2009

Hmmmmmmmmmm

The economy won't bottom in a V. Hopefully it bottoms in a W and not a WW, skipping along the bottom like Japan has done the last 20 years...

I’m strongly considering shorting the NASDAQ today.

This morning the markets gapped up above a logical level stop loss for Shorts and could have had another ramp up on a short squeeze. It hasn’t happened, which tells me that there may not be too many shorts left to squeeze. Who would have thought that making short selling illegal and shares impossible to borrow would actually truncate a rally…

This rally may have simply run out of fuel.

Here is the monthly chart of the S&P 500. It looks like two mirror images, but it is not – it is the 2000 – 2003 Bear Market next to the 2008 - 2009 Bear Market.

The Green Line on each chart is the first key Fibonacci Retracement Level at 23%. This line was the place where the trades sold off hard in 2002 and may be the same for this rally. At some point this market will need to pull back. It may be from here. The pullback in 2002 – 2003 was a 4-month affair.

The markets are trying to bottom, but are now extremely overbought.
Look at the Percent of Stocks above their 50-day at over 90% (second chart $NYA50R). So there needs to be a pullback.
But the Percent of Stocks above their 200-day is now up in the 30% range ($NYA200R), which is constructive for the longer term.
All we need now is a pullback that is followed by a huge-volume rally!

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