Najarian Agrees Underlying Technical Conditions Are Positive ~ The Risk Averse Alert

Thursday, January 29, 2009

Najarian Agrees Underlying Technical Conditions Are Positive

Today's trade entirely confirmed my concern over Monday's giveback. More subtly, too, every reason to remain positive likewise was confirmed.

The market's underlying technical condition remains decidedly firm. There simply is no sign a sudden bout of severe selling is about to come bearing down. So, the case made on Tuesday remains my preferred view. Weakness Monday and today suggests an extended period of further sideways trading probably is in store.


Whether the proposed outlook presented above comes to pass precisely as indicated is entirely speculative. You get the gist of what appears likely and this is all that's ever intended.

Now, the one thing I will be looking for as the market rises to its peak projected above is an imbalanced rush to bullishness.

Going into the early-January '09 peak a number of underlying technical measures strongly charged in the direction positively confirming the market's advance. Technical confirmation, in and of itself, is all well and good, of course. However, we have seen a number of instances where this or that measure (be it RSI, VIX, the McClellan Oscillator, etc.) moved on a fast track simultaneously with a market advance. This apparently has been an indication of buy-side imbalance, and typically has been followed by decided selling.

If we see this sort of thing again upcoming, I won't remain long Ultra ETFs. Instead, I will take profits, and possibly go Ultra Short.

NYSE 5-min

The Elliott Wave perspective you see above essentially details the basis for the outlook shown on the daily chart of the NYSE Composite. This Elliott Wave count puts this week's weakness — particularly Monday's — in fitting perspective conforming to well-defined formulations detailed in the Elliott Wave Principle.

One of the general characteristics of a so-called "b" wave (of an a-b-c corrective wave) is it leads the analyst to think, "Something is not right." This very much describes my attitude toward Monday afternoon's relatively deep, 5-minute RSI dive.

There's probably a little more selling to come before the market moves strongly higher. Look for RSI at yesterday's close to be slightly exceeded (to the top side), then a final decline coinciding with an RSI divergence (relative to today's low reading).

By the way... I've received requests for Trade Notification the past couple days and I have not had time to reply as I typically do. I wanted to pass along the fact I am long DDM, SSO, QLD, UWM, and MVV. As you can see, I think this trade's prospects are promising. So, do with this as you wish as the market prepares to turn higher...

Fast Money
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