Wednesday, March 18, 2009

Will The SP500 Stall At Resistance?

The SP500 came right up to the previously cited resistance zone just shy of 804, so the question now is whether this is the extent of the rally. The McClellan Oscillator closed at 294.99, a level indicating a very overbought condition, but this can also signify the kickoff of a new uptrend. The 5 period RSI is not yet at an extreme for most indexes indicating the potential for upside and the Qs have now closed solidly above the 50dema. It is beginning to appear more and more that a substantial rally is now underway. Today's action gave a preliminary breadth momentum buy signal. However, more work is needed for confirmation.

I plan to continue to look for breakout opportunities in individual stocks while I wait for a pullback in the indexes to add index long positions. I remain long the UYG from 1.53 with the expectation that the XLF will run to its 200dema. I also remain long the DGP with a stop under today's low. Several of the stocks mentioned in yesterday's post were up nicely today and I will be looking for opportunities to add positions in those names after pulbacks.

Looking back at the March 12, 2003 low, the first rally lasted 7 days. We are currently at 8 days, so a sharp pullback would not be unexpected, though not required. I will wait for the market to come to me rather than chase it.

1 comment:

dave said...

Went long USO today. Closed > 50E. Soon 20E X 50E. USO hasn't been > 50E, even intraday, since crude broke down in mid-July.

Recently, despite OPEC announcing that they weren't going to cut production - crude went up.

Yesterday, despite a build in inventory - crude down then rallied.

Regards,
dave