Thursday, July 22, 2010

Rally Taking Shape

The rally is beginning to show itself, while breadth and volume remain muted. Perhaps it is just the summer doldrums, but it seems to fit the B wave profile we have been talking about. Thursdays that close near the top of the range tend to lead to Fridays that close down, so I wouldn't be surprised to see some selling tomorrow. Even so, I think we will see a solid breakout above the downtrendline by the end of next week with follow through into August. Things may remain choppy for a few more days, bit once the crowd realizes the breakout is for real, the short covering may become fierce.

Today marked another buy signal as the Qs made a 3 week high. We now have 3 systems on a buy signal - MACD, IBD, and 3 Week. The Cabot Tides system remains on a short signal, but the Cabot group issued a buy signal this week. The discrepancy is that the long term Cabot Trend remains on a sell, but they feel like it will turn up soon. On the other hand, I do not see a solid buy signal according to the Tides criteria. I will maintain the system on a short signal until I see a change in character.

Oil is close to re-igniting its uptrend. Today's high was also the 61.8% retracement level of the decline from the May high. A solid close above 80 may be all it needs to get going. It will have to hurdle channel line resistance around 83.50 in order to make it back to the May high.

I see it has been about 2 to 3 weeks since I updated the System Tracker. I need to do some housekeeping and clean up a couple of errors as well. I will try to get that done this weekend.

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