Wednesday, September 12, 2007

Stock Update 12 September 2007

It has been a wicked couple weeks on the markets yet we have gone nowhere.

Here is the daily DJW line chart (click on all charts to enlarge):

The sell signal on this chart occurred when 4 things happened:

1) the ADX (14) red line crossed above 60,
2) the daily price fell through the 50 day moving average (50MA blue line),
3) the MACD fell below zero, and
4) the StochRSI (25) confirmed a continuation by staying below 0.2

Since then only the StochRSI has made a trip into positive territory with the rest (to this point) falling well short. In addition, the 50 MA is now in descent; this is a major indication that the medium term direction is bearish (down).

Next is the 1 box PNF:

Here it can be seen a short term buy signal was generated on Aug 31 when the price broke above 292. Normally I would have looked at this as a buy signal but given the line chart discussed previous I sat on my hands and watched.

Since then nothing has changed and the price has retreated to 293.93. In other words, this chart has yet to prove to me this rally is for real as nothing has happened in 2 weeks.

Next is the longer term traditional PNF:

This one is still on a buy signal therefore no panic to liquidate positions (yet?).

In a previous blog entry, I mentioned I expected the market to put in a minor rally followed by a retrace back to the initial bottom at 277.17. There is no indication on the charts to change this view.

This action the past 2 weeks has been fast and furious but it has been driven by day traders and hedge funds. All the big players (mutual funds, pension funds) have been on the sidelines (confirmed by the pathetic volume on the major U.S. averages the past 4 weeks). A real confirmation of direction will be evident once the volume picks up and we see which direction it is heading.

Last chart is the pathetic USD chart. I've used the long term chart to give some idea of how bad it is

The USD has broken to a new all time low against the Euro. It has support going back to 1992 at 79.12 (it closed yesterday at 79.68). Any close below 79.12 is truly in uncharted territory; it will be interesting to watch the chart action if/when it crosses this threshold.

Bottom Line: Still maintaining my 50% equity/25% Euro/25% USD positions. I am comfortable with this "neutral" position until this mess sorts itself out and a direction is indicated.


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