Figure 1. QQQQ/ daily
As of this morning, the indicator is now in over bought territory, and past peaks in the indicator are identified by the purple vertical bars. The graph goes back to May, 2008.
I really thought the market would be higher this morning and prices would test resistance levels providing a low risk opportunity to bet against the market. The ETF proxies for the major indices remain in the bottom part of their ranges, but they are below resistance levels. A good example of this can be seen in figure 2, a weekly chart of the S&P Deposit Receipts (symbol: SPY). The down sloping trend channel is identified, and yesterday, prices bounced off the lower channel line; prices still remain below resistance at 86.78.
From my perspective, the bulls have been bailed out again as yesterday's gain wiped away Tuesday's losses. This is how the markets have functioned on a short term basis since the top in October, 2007. If you went long and had losses, all you needed to do was wait for some government announcement to see higher prices and get out of your positions. But all of the goverment intervention won't wipe away the fact that this is still a bear market, and we have to remember to keep saying, "buy fear, sell hope".
While the markets remain in this short term sideways range, I believe the markets are headed lower. This is the essence of my two most recent commentaries on the price action and investor sentiment. Patience is warranted regardless of which side of the market you want to play, and the only thing one has lost is opportunity.
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