Saturday, April 10, 2010

Weekend Update

Well, from the looks of the price action on Friday, it appears that we have a 5th wave ED. Now, we have all the ingredients for a decent if not major market pullback:

- the 10 day ATR is just primed to give us a sell signal
- the technical indicators are in overbought mode on all time frames
- we've lost the initial uptrend channel and started a new one with a flatter slope
- the apperance of completed patterns

And so here's the lesson, if the market does not pull back at this point, it will likely melt up. I'm not talking about a 10 or so point pullback, I'm talking more in the neighborhood of a 100 points, then the market will once again extend much higher. As in all things of this magnitude, we take them one week and one day at a time.

Here's what I'm looking for to confirm that the market is going to respect the technical inidicators:

- I need to see a daily close near the lows with a range greater than 12 pts
- I need to see a daily bar's range be entirely below 1187
- I need to see the market touch 1065 to get really excited about an extended pullback.

I'll start initiating short positions as each of these requirements gets checked. Until then, the bulls have the trend, and we should just let them tire themselves out.
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