Saturday, May 29, 2010

Cautiously bullish.

Now that the CCI triggered a buy signal, we'll be looking for a potential exit. The 13/34 trend lines are solidly bearish, meaning we have to be careful. If you look at the chart provided, this is setting up almost identically to February. Even the CCI is almost an exact match. The only problem is that this time, the 200 day MA didn't act as support for the S&P and we are currently below it. That's a problem. However, on the bright side, the leaders - Nasdaq, Russells, Transport, and Bank Index - are ALL above the 200 day. Because of this, I am bullish and feel we have made a short term bottom.

I will be looking to exit my position either at the 34 EMA line (currently up near 1140) or perhaps when the CCI breaks south of the upward trend line. If we see lots of strength in early June, which is what I'm expecting, I may hold on to my position until we see some divergences set up on the CCI (higher SPX values, lower CCI's) like we saw in April on the chart below. At that point, we'll probably see another bearish megaphone pattern, but now I'm getting too far ahead. If you missed the buy signal, it's definitely not too late to get out of the G fund and into stocks. We'll see another short covering rally of some sort shortly. All it's going to take is one good piece of news.

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