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SUMMARY So far this week, the price action has been identical to the one we discussed in our Weekly Report (see the two charts and commentary on the bottom). Consequently, there are still two possibilities ahead of us; if the bullish outcome is going to prevail, then the indices must continue to rally first thing tomorrow morning, pronto! On the other hand, if today's pullback is followed by an anemic up day on Wednesday, then we highly suggest getting out of long positions and get ready to go short on Thursday because the bearish outcome will have prevailed; the rally has been aborted. Last week the markets went aggressively nowhere; however, the chart pattern which resulted from the price action has the potential to make life a bit easier for traders, because 80% of the time, we end up with one of the outcomes projected in the two charts below. Notice that the current price pattern is nearly identical to the one at points "A," "B" and "C. At points "A" and "B" we had a bearish resolution, while at point "C" we had a bullish resolution. If on Monday, we get an upside continuation and the indices close above last Wednesday's highs, then in all likelihood the rally will carry further, perhaps up to 2150 for NASDAQ and 1210 in the SP. Short-term traders may try long positions in QQQQ on a print above 38.75 with a stop loss under Friday's lows at 38.25. On the other hand, if on Monday we get a reversal and a close below 1170, then there is a good chance the SP may decline further to the 1150-1145 zone. Short-term traders may try short positions in the SPY, on a print below 1175 in the SP, with a stop loss above Friday's highs in the SP, at 1188.
Ike Iossif
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