When the market moves down for a couple of days your typical Nervous Norvis bull gets sweaty palms and heart palpitations. A couple of days down and the bears are pounding their chest. The only thing the bears can think about is bad news. Left to wonder of course, why is the market going up with all this bad news--the world is coming to an end.
The Stock market is in a classic uptrend from the capitulation low.
Review:
- During the capitulation phase the slope of the market became too severe to maintain and the market hooked off the lows as should have been expected. See: S and P Monthly Chart indicates a sharp rally is coming soon. S and P 500 in the 676 area. See: S and P 500 Rally Comes as Predicted
- Next we got very bullish news that most investors missed. See--Stocks Don't Fight the Tape.
- It became obvious that the market was ready for a major technical retracement in a longer term bear market. See: They called me crazy, S and P 900-1000
- Since the uptrend started, above 750 on the S and P 500, the market has traded according to a textbook.
- A rule that worked--always buy two days down in an uptrend. You could have bought the market at the 768 area; and again, this week around the around 816 area.
- The market continues to make higher lows. The most important ingredient of a trend.
- The market found support on a dip three times. This indicates there are buyers below the market. This is necessary to raise confidence.
- Bears continue to try and sell the market. The big difference they are running for cover at the first sign of strength.
- The slope of the green line (midpoint, support) continues to point up and is strengthening.
- The blue line is picking up momentum and as long as this continues it will help propel the market higher,
- The market is once again approaching the red line (two standard deviations up) and this should be watched. Short term traders should resist the urge to buy the market when it is at, near, or above the red line. This is where nervous norvises really get killed.
- There is still substantial resistance from 850-875. This is where the market will likely wear out bulls who lack patience. They will get out and will likely start chasing it right into the top and before the next major test of the downside.
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 Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments. |
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