We are holding off another day, due to a possible reversal today (Tuesday).
Discussion:
There hasn't been a definitive move to signal a short term top, but some of
our indicators are showing this latest push is extended. From a candlestick
standpoint, the QQQQs (representing the NASDAQ-100) put in a doji at a level
commensurate with a double top (dating to August 8th). The Dow and S&P-500
have both put in a series of lower highs and may be about to turn lower yet
again. The Russell-2000 nearing the top of a trading range established during
the recent market correction.
The key here is that volatility has increased while trading volumes died down.
With the big money players returning from their summer holidays, it is likely
that volume will kick in and will begin to move the market. The question, of
course, is which way.
The market have been ignoring potential bad news, as it relates to further
concerns about a credit crunch, as various funds continue to struggle and are
raising cash to meet margin calls, etc. In other words, optimism has returned
to Wall Street, which lends to a bullish overtone. There may yet be another
shoe to drop with another round of selling for hedge funds to meet redemptions
and margin calls. If so, look for further volatility until the last of the
significantly selling is put behind us.
Let's watch trading action today to determine if the bulls can, in fact, push
the markets higher and finally break the cycle of lower highs.
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