The Bear has teeth
Those basterd bears are pounding at the door and they want in on the party. The question is are we going to let them in?
Despite my previous bearish stance on AGG, it continues to put in higher highs and lows. First off, we've seen money start flowing into bonds over the last 2 weeks. While it's true money can flow into stocks & bonds at the same time, from studies I've done this only happens about 1/3rd of the time. Either bonds are going to break or stocks and at this moment I'm less inclined to believe bonds are ready to falter. If this is the case the rise in AGG should warn us of an impending correction in stocks. You can see AGG has already retraced over 50% from the previous all time high to its late November bottom and the rising trend line has been tested and held several times.
The S&P 500 was one of the few charts to give us a slightly higher high last week. I'll be honest with you, I'm not optimistic we are ready to break above and turn 1150 into support just yet. If I had to gander a guess, it would be that we will finish the month trading between 1150's red zone to 1130's yellow zone., with a break below the 1115 green zone turning me into a hard-core bear. If we do get a break above 1150 I expect it to be in late Jan to early Feb.
The Dollar is resting on the bottom of its Bollinger band. Based on this, I'm expecting a test of the 20MA and possibly the top of the descending price channel. I realize there are some folks still calling this price channel a bull flag, I'm not one of them because Bulkowski and his statistical evidence tells me so.
When I was developing the Axial-Drifter trading system I experimented with a variety of charts, seeking the right balance of buy/sell signals. While I didn't use the NASDAQ 100, I did gain a new respect for this chart because I've found there are times when it leads the markets down & up. This chart has put in a lower high and higher low. The lower high has me somewhat concerned, but equally important is the support we have at the 1853 orange line, I need this line to hold or I get bearish real fast.
On the Transports I see us having formed a pennant. The apex of the pennant is at 4194 and this is a key area of resistance we need to get back up above, in order to get Bullish again. We have two touches on each side of the pennant. My guess would be the third touch will be a fake-out and the fourth touch will be the breakout.
I'll be out of town in Las Vegas next week, so I don't expect to blog but I will try to provide updates to the Triad.
Thanks... Jason
