Monday, February 9, 2009

Still Waiting

The Qs finally pushed above the Jan 6th high by a whopping 4c today. While this probably means that we will see at least one more push higher, it will probably come after a pullback. Several of the indexes today including the Qs had a narrow range day indicating a contraction in volatility. November 3rd was recent example of an NR7 day after a rally. The Qs broke out to the upside by 4% the next day, but then collapsed. We may see an immediate decline tomorrow or a similar pattern with a breakout tomorrow followed by a decline.

As the Qs have approached the January highs, the patterns in a large number of stocks are beginning to mature, which is a tell that there is not that much upside left without a correction first. A good example is AMZN which has hit its upper parallel trend channel for the last two days just above the 200dema.

It would seem obvious that the markets have priced in an $800 billion dollar "stimulus" bill and a another bank bailout, so it is hard to imagine what additional positive news would drive the markets higher. At this point we can be confident that this is a countertrend rally. The only question is how much upside is left. We are now 52 trading days from the November 21 low. For the past two years, the Qs have consistently turned at 55 trading days +- 2 days. We may see another one in the next 2 to 4 days.

Dave posted some interesting comments on gasoline and the refiners on my last post. I definitely see some potential there, but with regard to TSO, it appears that it may have completed 5 waves up from the November low and may have completed an ending diagonal 5th wave today at the 200dema. There is room for one more up down sequence to complete the ending diagonal, but it may be time to consider taking some profits. If this is the first wave of a new impulse or zigzag correction, there will be another good opportunity after a correction.

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