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Tuesday, September 04, 2007


market update

the markets have squeezed the shorts hard since august 16, but it would seem that the bulk of any reflex rally is now over. the question is: what next?

if august 16 was The Bottom, then the next few days may tell a lot. says the newsletter:

Typically, strong rallies react to overbought readings either with a minor pullback or ignore them completely, as prices continue to rise. A weak rally, though, will frequently react with a substantial decline. Therefore, the next few days should provide a good indication of the strength or weakness of the current rally.

the options market would still seem to consider volatility likely.

Again, options are very high. So the jillion dollar question is whether they are a blazing sale, or are telling us September is going to be pretty interesting.

the s&p closed at its 50dma today, also the top of its 3% envelope. a number of divergences are still apparent from like price levels -- the basis here is august 8. cumulative points, on-balance volume, new highs. similar divergences are also apparent between the august 28 low and the august 3 low. even in the last few days thinning against the percentage over 10dma is noticable.

this has been a price impressive snapback but my expectation still is that it is a snapback and that a retest of the lows is still in order.

if there's considerable strength from here, however, and the sequence of lower highs is violated i'll have been wrong to have expected a retest from august 16.

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