03.19.2009 At the Zoo

I was at the zoo today with my wife and one of my daughters, so I missed the markets while they were open.  Here is my quick recap from a bird's eye view.

First chart:

Here we have three fib ranges.  Don't look at how some provided resistance so far over the past two days... instead, focus on where they overlap below the current price.  The potential levels of support are 773, 750, 735, and 720.  However, if the market retraces as deeply as 720, I will rotate my rally view to a more bearish take and expect a corrective bounce from there that will ultimately continue lower.  That said, provided the markets can hold 745 - 750ish, I think a pullback here would be healthy.

On the indicators on the above chart, I am looking at momentum.  The adaptive CCI has had a bullish zero line cross a couple days ago (and a pullback here to find support on it would be good), the double stochastic is embedded on the high end (the red line) which is bullish (if it can stay there with the blue dotted line hitting the low end and reversing it would be a perfect pullback setup), and the RSI and composite indices are both over the slower moving averages (red lines) and curling back for a retest.  This is a good momentum setup thus far for a pullback.  The last indicator is from Miner's book High Probability Trading Strategies (which I HIGHLY recommend) and simply shows that no bearish momentum indication has been given (yet) but that momentum is overbought.  So, overall in terms of momentum, this rally has sauce on its side.  For the bearish case, at the very least, I would expect a divergence to form somewhere.  The RSI is testing the bearish resistance area at 60, and a pullback to 40 - 50 and then a move higher will need to get through 60ish.  That would be a strong bullish signal.

Here is a simpler chart just for reference.  Much clearer support/resistance:

The candle formation today is a dark cloud cover.  However, the extent of the bearish move is not severe, and I don't think the candles look exhausted.  Generally speaking, it is the tiny dojis and especially evening stars that one needs to watch out for.  One dark cloud cover is not a sign of undoing.

Lastly, here is the chart from my last post done more simply in a StockCharts format.  We'll see how things progress from here.

As always, trying to be zen, but I think this rally is still one that can be bought on a pullback.