Thursday, November 15, 2007

Daily Equity Market Comment - 11/15/07

Once again the probability model disappointed us with its prediction of higher prices for today. That is two days in a row now, but I realize that this model is very streaky and we only use it for a guide as what to expect.

Currently the S&P 500 is near a critical juncture that requires higher prices in order to keep the most recent low in tact and also keep the intermediate term model in the bullish camp. So far the market has almost given back all of its gains from the stellar rally on Tuesday.

The good news behind this type of action is that if we can keep the low in tact then it bodes very strongly for a decent move higher and moving down as we have to almost erase all of the gains then becomes a big positive if the lows can hold, so there actually is a blessing in disguise here.

The other positive we have going on here is that there seem to be quite a few investors starting to jump onto the bearish band wagon and this is great for the intermediate term health of the market. We need to continue to see the vast majority of traders want to sell the rallies as they occur as we have seen all week. This should at least guarantee us a run back to the highs above 1570 on the S&P 500.

The probability model is rather mixed for tomorrow as it calls for the lows to hold and a rally to ensue. What it is not clear on is exactly what course the market will take to achieve these goals.
I have a grouping of numbers that suggest a sharply higher move up tomorrow and then I have a group of numbers that suggest a flat to mildly higher day. The only certainty the model calls for is that the market should not close lower and some stability should be forthcoming.

I continue to honor the reading of my intermediate term model which continues to call for buying weakness and this is exactly what I have been doing.

So inn a nutshell, the market should move higher from here but it must do so with a sense of urgency in order to keep the intermediate term in the buy weakness area.

On the day trading front, it was once again a very interesting day as the market remained range bound and scalping came fairly easy. Then, as we have seen time and time again the trading range was violated to the downside and we got a sizable move down. Although we did not know for certain which way the market would break, we did know that the wedge and triangle on the 5 minute chart were indicating a break one way or the other and an increase in volatility and this is exactly what we got.

Take a look back at the intra-day postings for today and you can see it develop. These types of days are excellent for learning what to expect out of the markets based upon patterns that repeat over and over again. Although these patterns are on a very short time frame, these same patterns come up in the daily and weekly charts as well.

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