Monday, September 28, 2009

Market observations - Back Test Time

I would like to reiterate that there are gaps on the ES that need to fill in the 1074 area...In my opinion we have to test that area or exceed it. It is entirely possible that the market fails to make a new high and instead confirms wave 2 for our impulse wave down. This could be fulfilled with a move to the 1077 area on the SPX cash.

As you can see the VIX has made another attempt to break its down trendline. This is accompanied by a MACD cross and RSI over 50...something to keep a close eye on...VIX is currently only backtesting this could drop below it again...or preferably consolidate and rally straight from here.

Transports had their huge sell day last week...the largest volume selling day in the $TRAN history. If the markets do continue up...into the Oct 2 to 7th area...any new high will not likely be confirmed by the $TRAN. This is a very good cue that these highs will be a top of consequence.

Oil is at an important support...and with the dollar showing strength could easily break the down-trend line and take a quick trip to 57. The alternate view is that the dollar needs a consolidation and will allow for some upside for Oil - though that should not amount to much.

Agriculture commodities are struggling and remain below the emerging 2-4 line of the pattern...a break of that huge support line below will likely coincide with a strong move down. Upside looks like it would be quite limited...and this chart does not look healthy at all.

The dow could get its legs, in fact it has to tomorrow...otherwise this whole pattern, VIX, Trans and DJ look like simple backtests of resistance. Personally, I think there is some remaining upside...though nothing substantial.

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