Rallying from the Low End of a Sideways Trading Range ~ The Risk Averse Alert

Monday, February 02, 2009

Rallying from the Low End of a Sideways Trading Range


I might agree with Cramer's intermediate-term view toward tech, but short-term it's clear NASDAQ does not need a rally in financials to strongly rally itself. Tech stocks these past ten years in particular have shown themselves easily pushed around. There's no reason to think this trend cannot continue irrespective of what other sectors do.

Thus, prospects for melt-up remain unthreatened. Underlying technical conditions continue supporting this positive outlook whose foremost basis originates with the Elliott Wave Principle.

Don't get me wrong. Elliott Wave considerations alternately allow for the possibility major indexes could imminently sink below last November's low. However, various technical measures suggest this is a less likely route. Instead, there's a better case the November 21, 2008 lift off bottom was the first leg of a three-wave, counter-trend correction whose second leg continues to form.

This second leg more or less is featuring a market locked in a sideways trading range, forming a base from which an anticipated market melt-up is slated to commence sometime over weeks ahead.


$INDU

I don't usually comment on the Dow Jones Industrials Average. Today I have decided to because it was the only major index to trade at a new intra-day low for the year. As you can see, I do not consider this a matter of consequence. Like all other major indexes the Dow simply is trading sideways, forming its second wave of three waves up from bottom on November 21, 2008.

There are two technically constructive developments to take away from the Dow's performance. First, you see a price-RSI divergence, today versus a week or so ago when the index was bottoming at a higher low. And second, there's a divergence in the volume of shares traded. It appears those willing to sell at these levels largely have been drawn out.

Despite apparently persistent trading weakness, all around the horn various technical measures fail to warrant any suspicion or outlook-threatening concern. Still, there remains reason to suppose the market's sideways trading of the past couple months will continue for some time. At this point, however, a trip back up to the upper end of the range appears in order...


Fast Money
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3 comments:

Greg said...

Tom, did you happen to catch the name of the fellow on CNBC this morning who sees an upcoming rally.His interview was lousy so I wanted to follow up by looking for some of his publications. Thanks. Greg

greg said...

cnbc finally posted: Charles Nenner Research Center

TC said...

Charles Nenner: Nenner Cycle Signals Entry Point, CNBC Squawk on the Street