September 20th, 2010

Bears case becomes dire

What can I say? I’m ecstatic. The Bears are all back in their dens crying over the market’s apparent strength. About the last hope they have rests in the lower than average volume levels. In my opinion, though, price action always trumps volume; even better, price sometimes precedes volume. I relish in today’s move. It gives great comfort to see your expectations being met, so exactly and so precisely.

For example, I happened to watch Cramer this evening and he had, Dan Fitzpatrick, his “best technician” on to explain to him and to the audience why the bears (including perhaps Cramer this past summer) the head-and-shoulder top never materialized and when they should have realized that it wouldn’t. Unbeknownst to me, Fitzpatrick’s appearance today was part of something called “Chart Week“.

According to Cramer, it is “a week-long series devoted to educating homegamers on how to use the charts safely and correctly.” You have to be kidding? Cramer teaching charting? Just read my archived posts and you’ll get a real education. Subscribe to my Instant Alerts (button in the right-hand panel) and you’ll see how it’s really done. Now I’m going to have to watch the next lessons to see if he’s correct and what sort of biases he interjects.

Fitzpatrick gave the explanation that regular readers here already knew because they had read it here 6 weeks ago on August 10 in “Top or Consolidation, That Is the Question?“:

“….here’s another view, perhaps a more cautiously optimistic one.

  • The sharp recovery (some might say for unfounded reasons) starting with the Generational Low on March 9, 2009 and peaking in April.
  • A resistance trendline connecting the 2007 peak with the April high (true, 2 pivots make for a weak trendline).
  • Finally, what might be considered a channel tacked to the bottom of the descending trendline the market is trying to break above.

Here’s an update the chart inserted in that post (click on image to enlarge):

The spark for today’s run could have been Obama’s Town Hall presentation on CNBC but I’d like to think and have been saying for some time that the market was going to break above the neckline of the inverted H+S regardless sometime this week, the show was merely extra insurance.

This isn’t yet a free pass to higher ground. Technically, the market is still within the trading range the top boundary of which is either 1150 or 1220 (the April high). But all momentum moves have to start someplace and today’s 1.52% move is as good a place to begin as any. Today’s close at 1142 is striking range of the price objective I’ve long been eyeing, 1150-1164. A break above that would really put a nail in the coffin of the bears.

I’m running out for more nails and am getting my hammer ready.

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  • Anonymous

    Maybe you want to buy a spare hammer too; you may wear out the other! MLee