Analysis for 09-14-11

Intraday:

                What can I really say about this?  We started the day off with things looking like they were going to stop at the 20 day moving average and form a reversal pattern but things went nuts and just kept on rising bring us up to a close 1.35% higher.  None of this makes any sense and I’ll tell you why.  We had worse than expected economic data, a looming default of a country, A COUNTRY, and even more concerns in Europe.  This rally was not a sign of strength nor was it institutional investors.  It was individual investors who don’t know jack about the market.  None of our technical levels held up and the overall economic outlook has not changed.  If you want more evidence that this was individuals, just consider that the Scottrade servers crashed as the moves began to accelerate.

                Even with all of the above information, we can still see some things that point the market lower.  As we “rallied” today we ended up forming an even larger and broader bearish rising wedge with a sharp reversal with no warning in the last hour of trading.  This has given us a better shorting opportunity as we will probably see bears come into the market and slap this individual rally down and down hard not to mention all of the people who made money today will probably go ahead and take some profits.

Daily:

                On the daily time frame we set up a rather large spinning top pattern which can act either as a continuation or a reversal pattern.  All of our indicators are showing bullish signals but considering the nature of this rally and the lack of volume to confirm reversal I think this is going to fail.  Don’t forget that our indicators are based off of either moving averages or price or both and that irrational movements in the market can move them.

This irrational rally came up and reversed off of the upper trend line of this large bear channel which also kept us in our bear flag pattern.  If we break out of this bear channel all bets are off and we will be rallying much further to the upside.  Is this likely to happen?  I wish I knew for sure.  I think, however, that we are more likely to get a reversal tomorrow and begin a move to the lower trend line of our bear channel which will have made our bear flag pattern break down as well.  This rally has no strength behind it.  There was no real volume behind it, and there were no “big” moves in our indicators.  I expect to reverse down and hard.