October 11, 2011
Uncategorized
By Geoff Bysshe
In the last Focus List I said we had enough consolidation to see a trend day. Unfortunately the gap today accounted for much of the trend of the day, but the market still acted as can be expected after consolidation. It went strong in a direction. This is a recurring pattern in the markets and I try to point it out repeatedly because it gives you and edge to see it.
After such a big expansion day into resistance, I would not expect another one, but there could still be opportunities on the long side via stocks that are not as extended or with OR Reversals.
The strength today puts all of the market watch charts but the IWM over the 50-day moving average, a move over today's highs would "confirm" the change in phase to "recovery" from bearish. The slope of the 50 on all the charts is pretty steep so this will likely temper an acceleration of this move higher. And the stack is also still negative.
The phase is the big picture so we don't want to ignore it but until we get some shorter term measures to indicate a move lower we can go with the short term trend. With positive pivot stack that means S1 is our benchmark that needs to be broken to be negative. I would also put a lot of weight on the prior day low. A break of the prior day low is a heads up, a close below it is a big warning that the phase could reassert itself.
Another important level for Tuesday will be the last hour low. This is because of many stocks and the indexes saw a pick up in volume and a strong rally from this level. Plus you'll find that S1 lines up with this level in many cases. So watch this level carefully.