Stock Market Technical Analysis Blog
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A great number of market participants are short the market and are being squeezed because they are focused on weekly and daily bar charts. What's really going on in the market right now can be seen on the quarter and monthly bar charts I have posted above. Charts 1, 2, and 3 are twenty year charts of quarterly bars. Charts 4, 5, and 6 are ten year charts of monthly bars.
In charts 1, 2, and 3 we can see that the red 5 EMA line has already started bouncing up from the green 10 EMA line from the price movement of the past week (the last quarterly bar is only one week old). This basic 5/10 lift on quarterly bar charts produces multiple quarters of upward movement as can be seen back in 2005 and back in the mid '90's.
In chart 4 the NASDAQ has a red 5 EMA line and a brown 15 EMA line. The NASDAQ is different from the other indexes, it trades heavily off 5/15 instead of 5/10 or 5/20. Looking at that chart we can see that back in 2004 thru 2007 every 5/15 bounce produced at least 3 months in upward rally in the stock market. In August 2010 that 5/15 bounce produced six months of upward market rally. If you look closely at the tip of the two lines you can see that the red 5 has leveled out on top of the brown 15 ready to start turning upward - its push upward setup.
In charts 5 & 6 the red line is the 5 EMA and blue line the 20 EMA. We can see that in both charts the tip of the red 5 EMA has turned sideways with the current monthly bar (which is only one week old) and is poised to start a 5/20 EMA line bounce as they both did last August.
In the big picture this is how multiple month ongoing rallies start, from 5/10, 5/15, or 5/20 bounces on their quarterly and monthly bars chart. If the momentum continues, the price bar on all three indexes will cross to the topside of their respective 5 EMA lines very quickly. Glancing at the three quarterly bar charts we can see the current quarterly price bar is crossing above the 5 EMA line right now on the NASDAQ & DOW, literally happening today.
I will keep this quarterly & monthly bars chart set as my 8th chart set on an ongoing basis so that we can monitor the progress of a new sustainable multimonth rally setup as it begins lifting.
Alan
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