Tuesday, August 17, 2010

A good beginning but a weak close

As I have been saying for the last couple of days, we were due a bounce and the bulls duly obliged today. The bulls were impressive for most of the trading session but gave a lot of their hard earned gains away in the last couple of hours. Not good. A strong close would have set up things beautifully for them heading into tomorrow.

Let's have a look at the S&P chart first.

The bulls regained controlled of MA(50), which is good news for the bulls. In another important technical positive for the bulls, we again made another higher low today as marked on the chart. The path ahead for the bulls, as one can easily see, is full of resistances as we churned in this area for months now.

The Nasdaq presents an even more interesting picture with it closing right at MA(50), making tomorrow a crucial day for Nasdaq. If it does manage to cross that, I see the next resistance at 2237.

To wrap things up, all I can say is one swallow does not make a summer. And the poor finish today certainly doesn't help in clarifying matters. The best strategy in my view, also the most boring one, is to wait and see what the first hour of tomorrow brings. If there is no follow through by the bulls tomorrow, expect the shorts to take no prisoners. Stay out if you are not sure. Sometimes in the stock market, just as in life, you gotta pick your battles. And when you finally do pick your battle, make it count.

Take care and good luck!

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