Thursday, September 3, 2009

Market Observations...Dead Cat Bounce?

I know, I looks like there could be a looks like there could be a sell-off. Lets take a look at the SP500.

Divergence everywhere, RSI, MACD, MACD Histogram and Volume. OBV did not diverge on the last high but certainly will on any rally here. Tomorrow is a critical day, volume has to pick up for there to be any juice left for the market. I think that the 1003 to 1016 area are going to be formidable resistances for the SP500.

The TSX is looking more bullish than the SP500. Please note the lines on this chart. Red lines indicate TSX non-confirmations of the SP500. Blue lines are confirmations. This has commonly occurred at significant tops and bottoms only. We have just gotten one - the SPX hit a new high and the TSX did not. However, TSX does, as a result of its significant exposure to mining stocks, look much better than the SP500. If it breaks out here with Gold, will it create another non-confirmation - TSX making new high and SP500 not making a new high?

I lean to dead cat bounce with non-confirmation by TSX. But if the SP500 breaks 1016 then all bets are off. Ideally, stocks pop a little bit here and make a wave 5 down to complete our impulse.
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