Wednesday, August 12, 2009

Correction Is Likely Not Over

The Qs made a new rally high today as did a couple of other markets, but it is doubtful that today's rally marks the resumption of the uptrend. It is more likely that this is a b wave in a still ongoing flat correction that will require another down move, possibly sharp, to complete it. The August lows are not likely to be exceeded significantly.

If we see a continuation move on substantial volume we may conclude that the rally has resumed, or if we see a substantial break of the August lows we may conclude that a larger correction is underway. However, neither seems likely near term.

Overall, today's action argues for a continuing sideways consolidation that will ultimately lead to higher prices, probably into late Sept or early October.

Waiting for the eventual move higher may seem like watching paint dry, but there really is not much else to do at the moment, except building a watchlist of potential breakout candidates, of which there are many. The following may be worth a look: AAWW, AIRM, AMGN, CMG, EME, ILMN, JCOM, JST, TLEO.

7 comments:

dave said...

Do you have any idea why option volume on most semiconductors is so relatively low ? And on the etf SMH it's really poor compared to other etf's.

Regards,
dave

dave said...

Was very impressed with today. Assuming the news tomorrow isn't horrible (& don't think it should be) can make a case of a 3 of 3 big day tomorrow.

Last hour action in semi's was impressive.

Regards,
dave

R. Craig Pritchard said...

Regarding the semi's, I can't say that I know why option volume would be low. However, out of favor markets can be a contrarian signal.

dave said...

Semi's option vol has been low for quite some time, perhaps most of the yr, but semi's themselves have not been.

Two more things i like about this week: 1) the late sell-off on Tues & Weds IMO are ultimately very bullish because it prevents too many from being long from the bottom & leaves us with more chasers; 2) there have been at least two "abc" patterns since the bottom which to me is like the mkt coiling for a potential move.

Regards,
dave

dave said...

Realized last night that an essential weakness of Terry Laundry & Carl Swenlin's work is that sentiment is not a part of their work. Therefore, they are vulnerable to the proverbial "light at the end of the tunnel".

While you cannot necessarily trade on sentiment, it can at least make one cautious when everything else looks great.

Regards,
dave

R. Craig Pritchard said...

The one thing about sentiment is that even the supposed experts don't seem to use it correctly.

The one error that most make is that there a two stances one should take: 1) position against extreme sentiment and 2) position with rising or falling sentimemt.

Right now, we still have rising sentiment overall, in my opinion.

"Contrarians" oftentimes just like being contrary, which is just a way to lose money. The crowd is right about half the time.

dave said...

I agree with your sentiment remarks, but to not use it at all does leave one vulnerable to the proverbial "light at the end of the tunnel".