Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Wednesday, July 28, 2010

The great 108...

Today all the major indexes pulled back substantially with the Nasdaq down 24. There is a lot of pessimism in the financial media this evening that this could be the start of a multi-day selloff. Anytime the market is selling, how much it has sold, how fast it has sold, and how long it has sold are pretty much irrevelant. What is key is to check the intraday bottom point on each and every day of the selling to see if the intraday bounce happened at any of the very important moving average support levels. While Wall Street media and trading tutorials promote the 75 day, 100 day, 150 day, & 200 day simple moving averages, wall street keeps one moving average pretty much for their own purpose and that is the 108 exponential moving average. Large computer buy and sell programs are built around this support/resistance moving average line. Back on 7/8/09 the 108 springboarded the second big leg of the recovery rally that began in March 2009. On 2/11/10 it springboard launched the third leg up of the recovery rally. On 5/6/10 at 1:33pm CST we crossed down thru it on heavy volume and massive computer programs kicked in and caused the 1 hour flash crash that made headlines. On 6/1/10 it became impenetrable resistance for an up move. On 7/14/10 it became impenetrable resistance for an up move. Last Friday, 7/23/10, we successfully crossed and closed above it. At 2:07pm today we set back down on the 108 EMA and bounced up quickly producing an intraday 30min bar chart hammer reversal candle.
This 108 EMA bounce happened on the S&P 500 index, the Nasdaq composite index, the Nasdaq 100 index, QQQQ Nasdaq tracking ETF, the SPY S&P500 tracking ETF, and the QLD Nasdaq tracking ETF, all at precisely the same moment. In the 12 yrs I've been charting, I've never seen the 108 EMA mentioned in any media, any stock market training books, nor any advanced technical analysis manuals whatsoever. What I have seen through trial and error over the years that this is the most used bounce point by Wall Street and it usually catches the short sellers off guard resulting in a squeeze that turns the market back up. The synchronized timing of this event today on all the indexes tells me that their intention is to stop this sell off before it gains anymore steam starting tomorrow morning.
The really big hedge funds are short side biased and know that the 108 e.m.a. is the key number and have been hurt badly with last weeks short crusher rally. Tomorrow morning is D-day for them. They will be slamming the first ticks with massive short selling to try to keep the market sell off continuing down. Wall street is planning just the opposite. I know that I am going out on a limb on this one, with only one day of real pullback having taken place, but I am looking for wall street to win and pull the rabbit out of the hat tomorrow.


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