Our downside targets were reached this week (2300 on Nasdaq, and below 1100 on S&P), and it triggered strong buying that sent the markets back up.
We remain in a high volatility environment.
Remember, back in May, when we wrote this about the news of Bin Laden’s death: “…unexpected good news that comes after a prolonged rise in the markets has a nasty habit of marking important tops.”
That actually marked the exact day of the high this year, and the markets have been declining mode ever since.
The news of Steve Jobs’ death this week may have been the opposite example of this principle: unexpected bad news coming after a prolonged decline, marking a significant bottom.
Time will tell.
Let’s have a look at the current chart for S&P longer term (click for larger image);
This chart shows the long term trend channel from the 2009 lows.
Last week’s drop tested the low and found strong support. That is a positive development.
My Earl momentum indicator now shows a broad divergence, that’s another plus.
With another week of lunar Red Period to go, we can start looking to do some buying on weakness.
We have to get out if the 1050 level is broken to the downside, because that would violate the longer term up trend.
Good luck, Danny
LunaticTrader Blog 