Tuesday, October 27, 2009

Time Cycles & Trend Lines Suggest a Trend Change

The S&P 500 has been repelled convincingly from a major trend line (Oct 07 to Apr 08) and the volume on the selloff has been larger than in recent weeks. Further the selloff has been impulsive.
Secondly the rally just recently surpassed the 38.1% time cycle from the Major top in October 2007 and is coming up on the 50% retracement. In addition, the market tried to approach the 50% price retrace, came close and was repelled strongly.
Finally the wave structure seems to suggest that we may have completed an ABC rally from the March 2009 lows.
All strong factors that could be signalling a trend change. But I learnt a long time ago that it is far better to let the market tell you when the trend has changed rather than forming my expectations.
My Portfolio is net short going forward and will be looking to short rallies.
A market move above 1120 will cause me to strongly revise my thesis.
Fundamentally the market also appears to have realized that the green shoots exist in the minds of bulls only. The market has also done an admirable job of convincing most participants that a recovery is underway, precisely the conditions necessary for a selloff.

No comments:

Post a Comment