Tuesday, November 22, 2005
Issue Contents:
| 10:07 | Market Direction And a sector idea |
Market Direction – Every Rally Needs a Pause
The Dow has now travelled significant distance since we issued the bottoming call many weeks ago, when all looked dark and gloomy; all significant targets in this first leg of the traditional year-end rally have been hit and ADX in the larger intraday time frames is nearing extreme levels. This confluence of factors makes us want to be more sensitive then usual for a pull back – provided any pull back holds at 10680 we’ll continue to look at the market with an upward bias, and if price finds support nearner 10790 we’ll want chase longs a little more aggressively on dips – as always, letting price prove to us that it can go up by buying as it rises, not while price still is falling.
Sector Idea
SMH – the semi-conductor / gadget space still appears to have some oomph left in it; if the general pull-back remains short lived today we would expect to see SMH trigger a long above yesterday’s harami inside bar. Note the last two days are also a reversal pattern – doji and harami are both “pause” candles, indicating hesitation and a balance of sellers and buyers – therefore we only want to be long now if price proves to us it has the strength to break yesterday’s high and ideally Friday’s high before the close. Otherwise, we’ll be stalking a long a little lower down in the days to come.