Quick thoughts on where we are.... This may be pre-mature, but I think we are starting our next leg lower. As seen in the chart, when the stocastic indicator in the last bear market signaled a buy signal, it was an excellent time to go short as the market rolled over. We saw this happen three times in three waves until: 1) we saw higher highs and lower lows in the markets (larger time frames) 2) the upward momentum return to the market (MACD indicator 2 lines turn positive 3) All moving averages attain a positive slope (all but 200 dma now) Let's see what happens but I would become more defensive right now or at least take some profits.

Big Rally... Where do we stand?

Okay, the S&P has gone higher than I anticipated. I still can't believe that we are entering a new bull market rally given the fundamental problems that have come to pass (credit crisis) AND the manner in which the current administration and the Fed are dealing with these problems (spending trillions of borrowed money). But, I don't trade fundamentals so lets look at the technical picture.

We are approaching the 61.8% retracement level of the current bear market decline. I think a lot of traders will be watching this level. We just made it above the declining 200 dma (not shown) and the higher we get above the 200 dma is getting the old rubber band pretty stretched without a pullback.

Take a look at the second chart, here we are looking at bollinger bands and the 20 month moving average. Notice that the direction of the 20 mma has significance and identifies the overall trend. It also tends to offer support during bull runs and resistance during bear markets. The direction now is down. It appears that the s&p is on a collision course with the 20 mma. Will the s&p stall just short at the 61.8% retracement level? I don't know, but I'm still not convinced that we are in a bull market yet. I am trading on the long side in shorter time frames. Commodities are offering opportunities but are currently overbought. I am stalking pullbacks. Good luck!!!

Is this the start of a new BULL market?

I wish it was, and it still may be. But nothing has changed yet. We are still in a bear market and this is just a bear market rally. Let me explain. Lets look at a long term chart that shows what the SPY (representing the S&P 500) did in the last bear market to what the market has done so far in this bear market.

In late 2000, the market began selling off by making lower lows and lower highs as seen in the chart. Also look at other confirming indicators (MACD Histogram & 2 lines) as they indicated that the momentum was clearly lower. But that all changed when the market made its first higher high in May of 2003. Notice that the indicators confirmed the price action. The green vertical line indicates when the bull market began.

Now where are we now? We are still making lower lows and I think it is probable that we will make another lower high in the coming weeks. But the market doesn't care what I think, so if the S&P can get above the last high (S&P 945 or SPY 94.55) and the other indicators confirm the price action/momentum, then I believe it will be time to start playing the long side. Otherwise, be prepared for the next sell wave. And with the magnitude of this recent rally, it could be a doozy...

SPY Steam Running Out???

This has been an unprecedented rally from the March 6th lows. When are we going to get a pullback? Will the next pullback be a buying opportunity? Notice in the above chart that each peak on the 60 m chart is losing momentum. Will options expiry this Friday be the final push to the upside? Or will we rollover until then? Momentum is up now, no signs of faltering - but stock longs beware, we are way overbought in a bear market rally. If everyone runs for the exits at the same time... it could get ugly.

Hey, this is my first post on my first blog... cool.