Tuesday, 23 November 2010

Sell off likely to continue.....

Since the last post on 15/11, when SPX was trading at 1197 and TMN argued for a continuation of the sell off ,things have not changed much regarding TMN's target of 1150-1130.

The NYAD chart seems right on track for the reckoning day; are we going to bounce hard from the lower trendline (marking wave 4) or are we going to experience a breakdown? TMN believes that current events around the world certainly do no support the notion of the lower trendline providing support, but for the time being its target remains at 1150-1130.

Other charts supporting the continuation of the sell off are that of the percentage of stocks trading above their 50 and 200 moving averages, and TMN's NYSE volume indicator. On the upper panel of the chart the percentage of stock trading above their 50 moving average has already given a sell signal (pink vertical lines).
On the same note, the percentage of stocks above their 200 moving average (lower panel) exhibits a negative divergence since Oct. 2009, and once again, it hit resistance on the downward trendline.

Regarding TMN's volume indicator it seems that after the March-April spike it is now quite clear what the trading levels for the indicator are. Having hit resistance, it is now headed to the first support level. TMN believes that all the above ingredients support its call for a continuation of the sell off.

Finally, on 8/11 TMN suggested a possible wave count for the Spanish IBEX. Certainly the European periphery problems  will most likely continue, with counties like Portugal and Spain following the Greek and Irish examples (TMN also thinks that Belgium is another candidate and it will analyse this in a future post). Back to the chart of IBEX now, it can be seen that the wave count so far looks good, with possible wave 1 of (iii) of [3] almost done. Of course, wave 3 of (iii) of [3] can unfold in a different manner than that suggested by TMN, but it certainly looks like IBEX is heading towards big trouble.

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