There are many who are now declaring that the rally from the November 21 lows is over, and they may be right. However, although today's decline may have seemed severe on the surface, it is too soon to call an end to the rally so soon after last Friday's breakout.
The lower trendline from the November 21 lows is still intact, the head and shoulders breakout is still intact, today's NYSE new lows was less than 10, and volume declined on most indexes from the day before. I did buy yesterday's breakout above the January 5 high and was stopped out today. I will be looking to go long again on a move above 30.87 in the Qs and 8885 in the Dow.
As I discussed in an earlier post, from a cycles point of view, we should have seen the decline continue from the mid-December high for a continuation into a late January low. Since that didn't happen, the most likely outcome would be for the rally to continue into late January with a decline in February.
At this point, a lot more damage will need to be done into to switch back the bear camp. In particular a break of the lower trendline and a break of the December 29 low. Until then we should expect higher prices. If Friday's employment report should come in anywhere under today's ADP report, that will be all the fuel the bulls need to push the rally higher.
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2 comments:
Dave,
I was afraid that you might feel that way about TLs analysis. While I think his projections are not always specific, his general ideas are usually correct. At this point, it is not confirmed which way we are going to go, but I think it is up. Three black crows doesn't mean much.
Craig
See Bespoke's Investor Sentiment chart that they posted today.
Am surprised how well correlated peaks of sentiments are with drops in mkt because i had written off Investors Intelligence because there has been excessive bearishness for many, many months.
The chart really surprised me; i've never thought that they would correlate like that especially with lower highs in # of bulls.
The AAII confirms it to an extent, too.
Regards,
dave
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