Tuesday, April 22, 2008

First Confirmation - Red Flag

This model gave us a confirmation of today being the first day of an impending correction in price.

Although the hourly chart is calling for some type of snap back rally on Wednesday, this strength should be used by short and intermediate term traders to lighten their speculative positions put in place to capitalize on the most recent rally.

Any strength from here should also be used to either sell some speculative issues short or purchase put options on the SPY.
For those who remain nervous about the health of this market you might want to consider purchasing puts against your long stock positions in order to synthetically decrease your allocation to equities.

This potential correction is going to tell us much about what phase the market is currently in.

Even if the market remains in a bear market I do not believe that we have seen all of the counter trend rally with this most recent move higher. There simply remains far to much bearishness to expect another leg down of magnitude.

Monday, April 21, 2008

Ford Stock - Take Action!

After an extremely powerful 57% rally in Ford stock, it begins to send a message that it is getting tired and needs to consolidate these gains.

A typical consolidation of 50% of the advance should be the norm so the prudent action at this point is to take these profits and await another buying opportunity.

More impressive than the 57% advance in the stock price is the technical confirmation that $4.95 is the secular low for the stock and from here we should see a very impressive advance in the stock price with a potential $15-$16 target for 2008 alone.

Equity Market Comment - Something For All Time Frames!!

A very non typical day today in the markets, as Monday usually exhibits the highest volatility out of all the days of the week and today was very quiet indeed.

The market continues to exhibit signs of putting in a short term high as both of the charts below will illustrate. Short and Intermediate term swing traders should be flat at this point and upon a confirmation (Stochastics Cross) of a change in trend should look to begin their short selling operations.

Very much like the NASDAQ, the SPY is even more so showing signs of a rally that is very tired and in need of some consolidation. The tight range today, especially on a Monday is a precursor to a possible stretch of higher volatility and most likely to the downside.

Aggressive traders can look to purchase SPY Put options with the intention of a short holding period, therefore it will not be necessary to pay the extra premium for June puts, the May puts should serve our purpose just fine.

The possible decline that is on the horizon is also going to be very important for long term traders as well, as the nature of this market move is going to send a very clear message as to whether or not a new leg of the bear market is underway or if what we just completed on the upside is just the first up leg of two.

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