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Technical Talk: Make or break for bull argument By Prieur du Plessis, on July 13th, 2009 posted in: Investment, Markets, Money  2 people had their say - chime in!
The comments below were provided by Kevin Lane of Fusion IQ. As seen on the daily chart of the S&P 500 below, the Index is at the lower end of its support zone (purple lines and arrows). Given that the Index is already qualified as oversold (i.e. down 8% from its peak), it is even more important that it should hold. If the rally off the bottom remains intact, an 8% sell-off to support should be met with enthusiasm by buyers. If buying doesn’t materialise down here, it tells you a lot about the psychology of traders and we are likely to see the market continue to drift lower. It is really important for the bull argument that the market takes some type of stand here. As this is peak vacation time (July to August) we would expect trading volumes to taper off slightly, making liquidity a bit of an issue.
Source: Kevin Lane, Fusion IQ, July 13, 2009. More on this topic (What's this?) Portfolio Update: Value Stock Guide Portfolio Up 12.90% vs 4.41% for S&P500 in January 2012 (Value Stock Guide, 2/4/12) Why We May See a Rally in U.S. Stocks (Money Morning, 12/19/11) Dollar Bull Trend NOT Over (Comments for thetechnicaltake, 1/13/12)  2 comments to Technical Talk: Make or break for bull argumentLeave a Reply |
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This chart does not look good at all. You can see from the red trend channel that the market is headed down. Also, if you draw the last short term trend line which he omits, you will see that the market has broken short term uptrend in addition to the longer term uptrend in the rally.
By changing the scale to that of log and not all the lines fit to prove such a compulsive argument. I ve found that trend lines can be drawn to prove almost anything the presenter wants to see, perhaps then it s better to stick with the linear scale.