Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Thursday, August 5, 2010

Something's gotta give...

Click on above image to enlarge and see 8/1/10 for how to interpret the top 3 charts

Today we started the day with another opening smackdown because of the alarmingly bad new unemployment filing numbers premarket. As for the rest of the day the market pretty much just fought the same intraday battles it fought yesterday and put us back in position once again to try to get back into the green channel tomorrow morning.

Considering what's at risk if the market turns down here is somewhat unsettling that every single point is so bitterly fought. Both sides refuse to give an inch.

In the charts above in row 2, chart 1, today's disappointment did not do any damage to the continuing 5/10 lay-up setup. If we open tomorrow exactly where we closed today it will go ahead and put a fine point on a perfect ascending triangle which under any other condition would be extremely bullish. If you look closely at the volume bars below, we are still in a declining volume for the past 2 1/2 weeks, this is really bad. In chart 2 of this row, we see that today's candle was a hanging man candle but with it being only four candles up from the last reversal candle it has little of the topping implications that it would if it were several candles higher. However, it is still serious in that it stopped right at the 100 MA again. In chart 3, tomorrow will be the last viable opportunity to get us back into the green channel.

Even though Friday's trading activity is always extremely low volume because many hedgefunds and Wall Street firms call it a week by noon Friday and a lot of department leaders don't even come in every other Friday, which makes it easier for the bailout team to "trade" the market higher. I feel like there is some exhaustion setting in from 4 days of sideways struggle and they may have to fall back on old faithful, the cheesy gap up at the open.

One last comment on the declining volume as the indexes go up. What this means is that very few of the mom and pop investors are buying into this rally at all and Wall Street is growing tired quickly of having to sponsor the moves themselves. If the positive moves are reduced to nothing more than gaps up - unable to move up intraday in real trading and the daily volume continues its steep decline, the legitimacy of this rally is going to come under heavy scrutiny. Let's hope not...
I am still in HOG in open trades.


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