Market Update 9 Apr 09 BMO
Since the start of March 2009, the DOW has not had three consecutive down days. Yesterday’s trading session was a significant win for the Bulls. In the face of negative news and broader market bearishness, the Bears were unable to seize the initiative to make a drive down to complete a hat-trick of down days – so close yet so far.
The DOW (7,837) now sits one full upside wave above the 50DSMA (7,543) and is “resting right on top of my one-year downside channel. Above it stands two formidable retracement levels – the 11 year historical retracement of 8.044 and the 10 year downtrend at around 8,250. Between those two levels lie my downside OP (8,185) from August 2008 – the one with the XOP at 6,000.
Another consideration will be the May 2008 downside Fan’s 61.8%. One more major factor is the obvious psychological 8,000.
With these many obstacles expected to dog the DOW, I will be expecting either a spectacular break above 8,000 today which would result in some major upside for the rest of April … or a similarly spectacular break down to 7,500. Granted that tomorrow is a Public Holiday and the start of a Three-Day Weekend, I am leaning on the former rather than the latter and will stick to my previous analysis of an extremely bullish April.
Next week’s plethora of economic data will be key to delivering this Bear Rally for April. Amongst the key ones will be;
- Tue, Apr 14 - PPI, Core PPI, Retail Sales (all 08:30 BMO)
- Wed, Apr 15 - CPI, Core CPI, Empire Manufacturing (08:30 BMO), Capacity Utilization & Ind Production (9:15) and the Fed Beige Book (14:00)
- Thu, Apr 16 - Building Permits and Housing Starts (08:30 BMO), Philly Fed (10:00)
It will be interesting to continue watching the market for its reaction to adverse news and earnings to see if it remains as stubborn and resilient as it did yesterday. Internals have been anything but boring. If anything else, the Bulls may be forgiven that this is truly a return to a Bull-run instead of a Bear-rally. Too much evidence is showing too much hope. Even the VIX has closed well below the psychological 40.00 support since early Jan 09.
But this is April and I cannot take this rally seriously (although I will take the ride up with it regardless) and will be ready to bail out come Expiration Friday next week. One thing is certain (in my mind at least) … I will not be holding any long positions in May.
If you enjoyed this post, please consider to visit Pattern Trader Tools, leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
Comments
No comments yet.
Sorry, the comment form is closed at this time.