Today's Market WrapUp 02.08.2007 Mon Tue Wed Thu Fri Goldberg Archive Bad
Technician Says, "Sell the Dow"
After putting in an intermediate term bottom in July, the Dow surged into an uptrend that has not stopped for either basing or a meaningful correction for over 7 months. This is somewhat unusual behavior and statistically, it can be shown that the odds favor such a meaningful correction to occur soon. However, the basis for most of technical analysis consists of giving the benefit of the doubt to trends which are alive and well. Given the apparently live(ly) trend of the Dow at the present time, it would only be a bad technician that would suggest selling now. Rather than being a bad technician, let me be a good one and point out some features of the Dow Jones Industrial Average 9 month daily chart that requires immediate attention but no short term selling action.
Looking at the shorter term in S&P 500 daily candlestick terms, we have an alert in the form of a hangman candle; but only a bad technician would suggest selling now. Rather, a good technician would see the end of a multi-day uptrend that has morphed into a 5 trading day basing pattern. Today’s hangman is an alert that the current uptrend may be in peril. But confirmation is needed in the form of a daily close below the red “head” portion of today’s price action. A close above about 1,458 in the S&P 500 invalidates this discussion.
Similar action is being exhibited in the S&P mid cap index which has gone up 10 straight days and 12 of the last 13 trading days. Today’s action was a hangman which needs confirmation. One can not rule out that the S&P mid cap index may not ever have another down day, but only a bad technician would sell.
Today’s Market Today’s market action looked fairly benign with the big exception of the behavior of the sub prime lenders, which did horribly. Of particular note was New Century Financial (NEW) which posted a fourth-quarter loss and said it was restating three quarters of results. It subsequently lost more than one-third of its value. This is the type of market action that we have not seen in quite some time – that is, of a relatively popular stock that was whacked to such a great extent in a single day. Also putting in a bad day at a time when they sit right at their neckline were the US homebuilders. It is my personal (not technical) opinion that the bond market is being supported, and so are homebuilder stocks. It will be interesting to see if Wall Street continues to come to the support of US homebuilders and sub-prime lender stocks in the form of analyst upgrades. Remember, that with respect to the homebuilders, they are just off of a major round of Wall Street analyst upgrades. As I stated about Wall Street analysts and Google, it is a good time to record the names of those firms who are upgrading these stocks in a manner that it would have been fruitful to record who was upgrading Enron in early 2001. Have a great evening. Martin Goldberg Copyright © 2007 All rights reserved. CONTACT
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