Market Update 2009.05.18

18. May 2009
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Below is an updated chart based on the fib extensions illustrated in past posts.  You an can see on 4/17, we had a reaction on the 100% level (870) and recently on 5/7, a dip on the 127.2% level (826).  Coincidently, the size of this recent pullback is about the same size as the one on 4/17 (approximately 50 points).

Using the technique described here, we see that the stochastic bounced off the 50% line.  I'm going to keep an eye out and see if we see a new high with some clear divergence on the stochastic or oscillator.  Preferably at the 1.618 level (~996) (if we get that high).  However, it's hard to not want to be short already (swing trade).

The obvious, ascending trendline (blue line) has been tested six or more times so far and must be getting tired. The horizontal red line could be a place where many long-term short traders are hiding their stops. Using techniques from this multi-part article by Timothy Morge. 

 
 
We might also be witnessing a mini "Bump and Run" formation.  More about this type of formation can be found here. 
 
 
 

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