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Waiting for the Next Stock Market Rally

Stock-Markets / Stock Index Trading Jan 28, 2009 - 03:42 AM GMT

By: Kingsley_Anderson

Stock-Markets Best Financial Markets Analysis ArticleIf you have been watching the news, plenty of analysts and commentators, especially the perma -bulls, are falling over themselves because the market put in three positive days in a row. That is all fine and good, but one really needs to look at the charts to see the true picture.


While we indeed had three consecutive up days, the indexes are within a tight trading range. In particular, the S&P 500 is trading between 800 and 850, while the NASDAQ is trading between 1430 and 1520. Moreover, as the indexes rise in price, volume has decreased. Not a good sign.

In the bulls favor, the recent higher low is still intact on the indexes. Volatility has also decreased. On Tuesday, the VIX closed at 42.25, dropping more than 7 percent. The McClellan Oscillator also crossed over the zero line today- a short-term buy signal.

So, are we in for another market rally? At this point, things seem to have settled down -for the time being. However, that does not mean it is a good time to jump ahead of any possible move. The indexes still have numerous resistance areas to breach, including the 50 day moving average. For position traders, caution is still the best course of action. If and when a bull market begins (or even a tradeable rally), there will be plenty of time to go long and ride the trend.

By Kingsley Anderson

http://tradethebreakout.blogspot.com

Kingsley Anderson (pseudonym) is a long-time individual trader. When not analyzing stocks, he is an attorney at a large law firm. Prior to entering private practice, he served as a judge advocate in the U.S. Army for five years and continues to serve in the U.S. Army Reserves. Kingsley primarily relies on technical analysis to decipher the markets.
Kingsley's website is Trade The Breakout (http://tradethebreakout.blogspot.com)

© 2009 Copyright Kingsley Anderson - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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