Analysis for 08-25-11

Intraday:

                After the Buffett bounce early in the morning we reversed when we hit the 20 day moving average on the daily chart.  There was no real pattern that I saw on the intraday chart other than the fact that we traded within almost the exact same range as we did yesterday.  This is indecision defined.  Everybody is waiting for jack hole (the Jackson Hole meeting) and getting ready for any announcement good or bad.

We saw something during trading today that isn’t usually as clear as what it was today.  With the Buffett bounce we saw money rush into financials only to reverse sharply shortly thereafter as we saw some short term profit taking.  That was not the unusual clearness I was talking about.  The unusual clearness is the combination of money leaving safety stocks as well as leaving risky stocks after the initial bounce.  Just about everyone is waiting for the fed announcement tomorrow.  You want a face ripper rally?  So do I, and if the markets like what they hear we will see one.  However, if Bernanke disappoints or we see a bad GDP number tomorrow we could see massive capitulation.

Daily:

                On a daily time frame, nothing really changed.  As I said before we settled into an indecisive pattern.  This indecisive pattern is called a “doji”.  We didn’t see a doji set up as a single day candle but when you combine yesterday’s candle with today’s candle you get one.  Dojis are usually an indication of indecision but they can have a positive or negative connotation depending on where they occur within a trend and/or the position of the cross (higher being more bullish and lower meaning more bearish).  The positioning of this doji combined with the lower cross (called a shooting star doji.  Don’t let the positive connotation fool you, this is a bearish pattern) has a bearish connotation.

                We appear to be setting up a triangle/wedging pattern (a sign of consolidation before a move).  Tomorrow’s fed meeting and economic data could push us either way.  On the other hand, if tomorrow’s information and data has no real connotation either way, we could continue to consolidate until we hear from the president about his jobs program.  I personally will be sitting on my hands until the market chooses a direction by either breaking the current upper trend resistance or breaking below the 1120 level.