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Wednesday, February 25, 2009

02/25/2009 Market Recap: New Low or Firework?

The sell off before close might mean nothing, very short-term the market was very overbought, so even without the sell off before the close, we'd see a pullback tomorrow morning. Tomorrow could be critical to determine the market's true direction.


1.0.5 Major Accumulation/Distribution Days, yesterday was a so called Major Accumulation Day or as other called "90% day" (see chart bellow, it's defined as a day with green bar higher than the horizontal blue line). Although we've got lots of Major Accumulation Days recently, but the one we had yesterday was very unique, it happened near new low. Statistically, after such kind of Major Accumulation Day, market usually fireworks first then might or might not test the previous low. The only exception was Oct last year. Bellow, we'll see, since Oct last year, how the firework went after a Major Accumulation Day formed near new low.


As illustrated above, I can see 4 things:

1. Closed red today is quite normal after a Major Accumulation Day, so again, it (closed red) didn't mean anything.

2. Tomorrow shell be critical to determine the market's true direction. Looks to me, the reason for no firework in the last Oct was because CPC was not low enough.

3. Actually, the last Oct did have a firework, it just happened too fast - only lasted one and half day.

4. Even if no firework tomorrow, like what had happened last Oct, the worst (if past statistics still work) is to test the Monday low which seems not as scary as that of last Oct, right?

OK, what if Monday low was broken tomorrow? After all, the past statistics cannot guarantee the history 100% repeats itself. Look at the chart bellow, courtesy of, NYSE Cumulative TICK, pay attention to green cycles, short-term, intermediate-term or whatever-term, the market is rather closer to a bottom than a top, right?


So, the conclusion: Bulls should not be too worried as long as the current position is not heavy.


1.0.3 S&P 500 SPDRs (SPY 30 min), possible Head and Shoulders Bottom in the forming which means if we do see firework, the target is around $81.93.


3.4.2 United States Oil Fund, LP (USO 30 min), very short-term, oil is overbought, period.


1 comment:

  1. Volume is almost right on that old H&S. ;)

    Some fool was looking at the tick and saying that that was a bad sign...I figured if he thought it was bad, it must be good.

    If we do get that 81, look for a large scale bear flag to form off of mondays low, the 81 high, pull back, then it should get us near the mid 80's. Then this gets fun.

    Expect all this unexpected chop.

    Upside bias till all this bearish bullshit ends, but if we can get enough chop, they will never believe, and we can climb a wall of worry.

    Like you said, we just get another divergent low.

    If you lived through November, you aren't going to puke them up now.

    Assuming Europe doesn't implode... Feels like a wall of worry to me.

    The thing you missed is that Jan-monday is one large Bull Flag.

    Volumes are wrong for any large scale Head and shoulders. we are in a large scale consolidation, figuring out if the world is going to stop... or continue to turn.

    Armageddon only happens once, and they don't take cash. may as well be in stock.



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