Monday, May 16, 2011

Support Collapse or End of Correction?

The market was not able to hold the 1330 support level and the close today turns the market bearish. The positive bullish signal on Friday was negated by the reversal later in the day and it seems like unless the market can overtake the TA again, the next target is 1317. The pattern that I was watching broke but in turn it is creating what it looks like a descending wedge, which is a bullish patter. Also, I posted the the intermediate chart so we can see where we are in the overall picture. Short term is definitely bearish but looking at the intermediate chart the recent negative action looks like an obvious correction and not part of a sell off. Note the market has respected the rising trendline of the triangle which it broke out of last month so unless these support levels collapse, we can expect much higher prices when this is done.

I find it interesting how the market turned from very bullish to bearish without much reason. The catalyst is supposed to be the commodities sell off and the strong dollar so we have to see how the market will react when these asset classes resume their rally (and yes I think they will keep going up).

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