Wednesday, 16 July 2008

Bears Should not get Over Confident


The cash S&P500 formed a downtrending day on the daily chart. It was another volatile ride intraday as we fell quickly into the area I described as critical longer term support yesterday, 1188-1204. We bounced strongly from the top of this zone but fell again into the close. The ADX rose yet again – what else can be said except that the downtrend remains intact.

Using Wilder’s Parabolic Stop and Reverse methodology, I would continue to keep a very close stop on short positions at 1253.86. We have now had five trading days with an RSI below 32 and so the odds of a strong rally beginning should not be underestimated. Once again support below the market is in the 1188-1204 area.

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