Saturday, May 8, 2010

Latest Thinking.. May 08 2010

The warning signs were all flashing. Bearish CCI Divergence - check. Expanding Megaphone Pattern - check. Erratic intraday trading with a loss of liquidity - check. The chart below has some useful information.

Now the focus shifts to looking for a bottom. Here are my thoughts. First off, I fully believe we'll see new recovery highs, or at the very least, a double top. There was too much strength before the crash, with New Highs vs. New Lows being very bullish. With that said, going long right now wouldn't be a terrible thing, but I think there is a better price to be had.

I will be looking for any of the following things to happen before going 100% S in my TSP.

1) A lower low on the SPX with a higher CCI value. This is strong bullish divergence... (See Early February.)

2) 2 consecutive green candles above the lower bollinger band.

3) A bounce off the cyan line which connects all the way back to the 2007 and 2008 peaks. Look how we bounced off back in February.

1 comment:

  1. If we do retest April highs, there is a good chance the large cap stocks will outperform the small caps. I think when the bottom occurs, I will be looking to go into C rather than S. If indeed the C outperforms the S, the next top will likely be a major cycle top.