Time and Price Square Out?

This is the chart that should define trading in the first half of 2010.

The markets have been heavily influenced by technicals. That seems to be due to the fact that computers account for about 80% of all trades. So plug in your algorithm and let the cash register ring…

Technicians would refer to this as a “square out” where you simultaneously reach key levels in time and price.

These situations are often setups for accelerations of trend or sharp, nasty reversals. Time cycles are expected to trigger +/- 2 periods from the key date, so sometime between now and the end of January will be a very important period of time.


If we are going to see a nasty correction, then the next week or two from the current price range or a few percentage points higher should offer a very good technical setup.

I think the two most likely scenarios are the following –

1. A spike up over the next two weeks into the 1,228 – 1,250 range
2. Price stalls out in the 1,140 – 1,158 range

You should be on high alert for a meaningful reversal if price becomes extended above here! For those interested in committing new Long Term capital, you should probably be looking for a better entry in the future - or have a very tight stop and expect a better than 50% chance of being stopped out of your position in the next few weeks.

Let’s see if the reversal triggers.

In The Mean Time
I see lots of breakouts from trading ranges and as long as prices are working their way higher, the rest is just noise.

Railroads have broken out again. Also, watch how Cisco and Intel trade over the next few days. They are still big components of the Market Cap-Weighted Indexes and can have meaningful impacts on price if they continue their breakouts –