Sunday, November 30, 2008

Time to get bullish?

Based on my reading that the rally last week was driven by a dead-cat bounce by laggards, it suggest that the majority of what we have seen is being fueled by short-covering and value investors that stepped in at S&P 750 and Dow 7500. While positive, there are several technical conditions I need to see met before I am willing to get bullish enough to begin swing-trading the long side, none of which have occurred.

1) A break of the double inverse ETFs below their 50d MAs. This began to happen on Friday by the most volatile of the bunch but I am looking for a continuation of that trend. Following that will be a break of the 2x long ETFs above their 50d. Confirmation will be a substantial enough break that they remain below/above their 50d MAs in a short-term overbought/oversold condition as defined by RSI(2) > 90 and RSI(2) < 10.

2) A higher low logged on the broader indexes with confirmation occurring at a break above the previous high which is possibly being set now.

3) A tick up in the number of successful high-volume breakouts. This would indicate growth and speculative traders/investors are back in the market and a return of risk appetite.

4) Institutional buying as indicated by IBD style follow-through day and higher-volume positive days.

5) A 10d/50d MA cross on the IBD100. This has proven to be a pretty good trend indicator.

It is not possible for the market to enter a new medium-term uptrend without accomplishing these items so my confidence in this market will begin to grow as I can start checking them off, until then - remain wary.


Woodshedder said...

Hey, he's alive!

Dude, I thought this blog was run by a robot!

bhh said...

Hey Wood,
If I could figure out a way to get my computer (or a robot) to crunch these numbers every night and post them, I would have done it a long time ago ;)