Brief Update May 21st 2011
Wait
Have patience
There simply can not be a bottom without a capitulation event. That is just my opinion based on a study of every bottom we’ve seen since the 09′ lows. So far this still appears to be valid.
What we’re seeing now are a series of bear flag patterns in the 60min charts that continue to be confirmed with breaks of the lower trend lines.
You can easily see a couple of major ones on this chart of SSO along with a failure to hold decisively above the MA’s.
This kind of action will eventually take its toll on the retail crowd as they finally conclude that dip buying just isn’t working anymore and that preservation of capital is the best trading strategy.
If you ever posted a comment on this blog, then I sent you a link via that email address. If you use multiple email accounts, then you might want to check to see if you got my message.
I am moving next week so this really is my last post.
Remember:
Money in the market is money at risk.
Only the paranoid survive.
It takes forever to reach a destination that does not exist.
GL
Edited at 8:20 P.M. local time to add the following:
Notice on this chart from the week ending 5/13 that when the RSI rose above 70 that IWM sold off. In the recent past buying in IWM has been so strong that even when it was so obviously overbought with the RSI above 70 all it did was pause a little bit. Also notice the bear flag and failure.
Notice on this 60min chart for the week of 5/20 that each rally attempt lately has failed with a break of the rising trend line/bear flag pattern. This chart uses the 13/34 EMA mechanical system stolen from Stock Tiger and shows how the 13EMA just can’t seem to stay above the 34EMA for very long.
Charts courtesy of FreeStockCharts.com
During the decline from April 2010 to the first week of July 2010, this pattern repeated over and over again. Until there is some kind of capitulation/selling climax event in the market, then I expect this pattern to repeat much as it did in the year ago period.
