Tuesday, November 24, 2009
Slight whipsaw effect
First we had the Climax High sell signals in the nasdaq (marked in red) on the 11th, after a nice little run up from the lows a few weeks earlier. It went down momentarily, but then 2 days later it broke out to the upside, making a new 52-week high marked in bright green) and surpassing the high of the Climax High. Usually we can take this as a contrary buy signal.
But the new high didn't work out either, at least not as a buy signal. Here's a fresh chart of the nasdaq composite to illustrate. This time both the buy and sell signals are wrong. We appear to have entered a choppy, sideways phase.
In perspective, the last reversal downward in the nasdaq (beginning with the Climax High signals on October 20th and 21st) happened just as it had started setting new 52-week highs (shown in bright green) for the first time in quite a while. The old 52-week highs served as a resistance point, deflecting prices downward.
It bottomed out on November 3rd. As noted below, we called the bottom based on a nice pulse in the Number of Climax Lows breadth indicator. We also noticed that the low was lower than for the previous decline, no longer fitting the strict definition of an uptrend (higher highs and higher lows). And, it also undercut the 50-day exponential moving average (shown in blue), which usually serves as a support level.
From there the nasdaq spent the next few weeks working it's way back up, until several days ago when we had another sell signal. Two days later it managed eek out a new 52-week high, but just barely, before moving downward again.
What's it all mean? The sell signal arrested the uptrend, but it didn't really lead to a sell-off. So we're going with the new high as a buy signal, and predict that the uptrend will resume again soon. We say this with confidence, because plenty of stocks are acting very strong. Things are breaking out all over the place. Most importantly, the big leaders are also doing fine, either making new highs, or threatening to, perhaps correcting or going sideways but still with a net accumulation / distribution reading over 50%.
But the new high didn't work out either, at least not as a buy signal. Here's a fresh chart of the nasdaq composite to illustrate. This time both the buy and sell signals are wrong. We appear to have entered a choppy, sideways phase.
In perspective, the last reversal downward in the nasdaq (beginning with the Climax High signals on October 20th and 21st) happened just as it had started setting new 52-week highs (shown in bright green) for the first time in quite a while. The old 52-week highs served as a resistance point, deflecting prices downward.
It bottomed out on November 3rd. As noted below, we called the bottom based on a nice pulse in the Number of Climax Lows breadth indicator. We also noticed that the low was lower than for the previous decline, no longer fitting the strict definition of an uptrend (higher highs and higher lows). And, it also undercut the 50-day exponential moving average (shown in blue), which usually serves as a support level.
From there the nasdaq spent the next few weeks working it's way back up, until several days ago when we had another sell signal. Two days later it managed eek out a new 52-week high, but just barely, before moving downward again.
What's it all mean? The sell signal arrested the uptrend, but it didn't really lead to a sell-off. So we're going with the new high as a buy signal, and predict that the uptrend will resume again soon. We say this with confidence, because plenty of stocks are acting very strong. Things are breaking out all over the place. Most importantly, the big leaders are also doing fine, either making new highs, or threatening to, perhaps correcting or going sideways but still with a net accumulation / distribution reading over 50%.
// posted by gigascanner @ 2:43 PM 
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