Sunday, June 22, 2008

GE Breakdown

GE has long been considered a bellwether for the economy. Let's take a look at a monthly chart of GE. The lower trendline of the rising channel from the 02 low has been broken decisively, and the 06 low has been taken out. The probability is very high that the 02 low will be tested by the end of the year, which does not bode well for the economy or the stock market.

On the other hand, the Qs are holding up fairly well while the Dow and the S&P500 are heading for their March lows. Three of our systems are still long or neutral at the moment. I suspect that the Qs will make an attempt at a new rally high in July while the broader markets make lower highs.

Currently, we are headed into the 20 week cycle low due June 23rd, but the low will probably extend into early July. Typically a 4 to 8 week rally would be expected to follow, which may be a good long opportunity for the Qs unless they break down dramatically in the next two weeks.

But be patient, the low is not in yet.

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