Stock Market Poised to Make a Bee-Line Higher ~ The Risk Averse Alert

Monday, March 16, 2009

Stock Market Poised to Make a Bee-Line Higher

If you look again at the long-term chart of the NYSE Composite published Friday and focus on noted RSI sell-side extremes, you might observe how quickly RSI reversed to the buy side, even extending rather rapidly to a buy-side extreme.

I bring this up for a reason. Namely, a fast-moving RSI swing from sell-side to buy-side extreme, indeed, can happen. This, of course, raises a question. Is it about to?


So, here we are again, banging on RSI's ceiling of the past ten months where buy-side and sell-side strength are in balance (i.e. in the vicinity of 50), where time and again the sell-side has prevailed. Will it again?

I don't think so. MACD, although still on the sell-side, has taken a strong, positive turn (this subsequent to diverging from the NYSE Composite's performance since October '08). Furthermore, a beefy volume of shares exchanged during the market's recent launch higher likewise is an encouraging sign.

Thus, the market's further advance rapidly pushing RSI to a buy-side extreme in the 70-80 range appears entirely possible.

NYSE McClellan

Like-colored lines are meant to highlight McClellan divergences — registered both by the Oscillator and the Summation Index — relative to the NYSE Composite's performance. This picture makes a case showing underlying strength building at the lower levels the market has been trading over the past six months.

The Summation Index has only just begun its turn higher. Before any sustained market decline redevelops the Summation Index likely will exceed the level it reached at the start of the year. Indeed, it might even exceed its peak set last May (2008) before the market is again at risk of renewed selling pressure.

These assumptions are founded on Elliott Wave-related expectations, the near-term gist of which were put forward Friday, speculating how the market's present advance might carry the NASDAQ Composite upward to the 1700-1800 range. 6000-6500 appears a reasonable near-term objective for the NYSE Composite Index.

Considerable doubt in upside prospects remains the consensus opinion. This afternoon's decided turn lower only sustains it. Yet positive technical developments make it rather clear an explosive move higher could unfold sooner than most imagine. Whether this projected surge transpires with haste, the path of least resistance points higher. We'll see if well-hedged short equity positions can be defended going into Friday's expiration...

Fast Money
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Anonymous said...


So far you have been right and I have been wrong.

However, I maintain that the greatest money making opportunity of the year is on the short side, right now.

I will be going all in on the short side once we reach 805 on the SP500.

I think the "liquidation" phase of the downtrend that started 1/6 is imminent.

Good Luck and Take Care.

TC said...

The trade over the next few days could move in your favor. 710-720 should be as low as SPX goes, though. It might struggle to break below 740.

My recommendation is simple. Close out your shorts on this pullback. Re-establish them at the end of the month. By then SPX should reach its objective in the vicinity of 950-1000.