Saturday, July 10, 2004
Comments - 10 July 2004
Hello to anyone who stops by! One of the psychological effects of watching only an index during a rangebound period is that it imposes upon one the same numbing ennui that that index is reflecting.
The downside, of course, is that it also lays the ground for the famous "frog boiling" example, ie, you put the frog in cold water and the frog is oblivious to its fate as small incremental heating of the water raises the temperature. Oblivious that is until the water reaches that point at which the frog registers pain and becomes aware that action is needed. But by then it is too late, its life-saving energy has been sapped. But enough of this nonsense. Here is the chart (
click here to view in a companion window).
There were a number of warnings that the desired rally would not materialize before a pullback, as indicated by the Short Sto5 divergence and, more importantly, the VIX relative crossings. The range has been contracting and recent attempts to move completly to the upper black fork line have been failures. The last bullish attempts was the failed hovering at the black fork median line.
What could have been a short pullback has become deeper, bringing classic indicators, even those with non-classic settings, into an overbot zone.
Having touched deep overbot, Friday's net positive close created little reversal hooks. HOWEVER, in my opinion, a bounce will be shortlived, or at least won't be confirmed to be much more than a dead cat, until the various indications overcome resistance. A full pullback target is the lower black fork range,
1094-1096, with a dead cat rebound of
1122.
For those still new to indicator analysis, very few oscillators truly move between 0-100. Rather, they form ranges whose tops and bottoms often indicate future potential resistance and support. That is what the horizontal red dashed lines on the Stochastic and RSI panes indicate. Similarly, as they merely reflect price, trendlines are also useful, particularly if compared to its corresponding price trendline (horizontal or otherwise) for divergences (positive or negative).
So, if the indicator breaks the trendline resistances before price does, this would be a bullish divergence. Similarly, if the indicator is repelled before price shows a reversal, this would be a negative divergence.
Good luck to all in their trades!
Click to open a larger image
Labels: chart-analysis
At last, over the rim
of the waiting earth
the moon lifted with
slow majesty
till it swung clear of the horizon and rode off,
free of moorings
- Kenneth Grahame,
The Wind in the Willows
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