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Weekend Analysis for Tue May 13th 2008 RSS

Tue May 13th 2008
Triangles All Over.....Watching 2517 Nas
by Jack Steiman

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We have spent a few days talking about the triangles that are setting up on all over the place. On etf's, stocks, indexes. Just about everywhere. Why do I keep harping on them. Because triangle are basically hesitation patterns. Ultimately though, they are really continuation patterns. When stocks get up to  a certain trend line (triangle) area of resistance, they often spend time pulling back setting up those triangles. They can be long winded and annoying no doubt but they are also a way the market unwinds those oscillators that allow that stock to make a break out over time if the trend in to the triangle over the past few weeks and months were up. If the trend had been down then the continuation pattern would be to break down out of that triangle. Again, there are no time tables to know when the triangles will break one way or the other. One of the keys though is taking out an important moving average like the 50's and using that as a spring board until the triangles get taken out to the up side. That is beginning to occur thus it keeps us mostly bullish near term regardless of how long the process takes. Situate yourself in the best bases such as Apd which were in and deal with the volatility until it makes the move. Over time they should break out and when they do they can move up rather rapidly. The market is all about odds and percentages and right now the odds say, but there is no guarantee of course, that the market will want to move higher in the near term. It's really all about the Nas taking out the last resistance zone at the 200 day sma at 2517. If we can get that area taken out the thin zone,. as you know by now, measures to 2575.
 
The selling early on today got somewhat intense but sure enough, that break out over 2458/2460 acted as perfect support as expected. We didn't get that low but close enough and the Nas reversed and finished higher. I'm focusing on the Nas because it is tech that leads a healthy market and tech is definitely starting to lead just about every day over the past week or so. When only 30 stocks are leading such as is the Dow, that's not constructive for the overall market. You don't want money running in to safer plays.You want to see an increase appetite for beta and growth. The Sp is fine but you want the higher priced stocks, the higher risk stocks to get money to show growth is where the market is putting its money. I understand most of you don't really believe in this market but if you've been shorting over the past several months you're not having a good time of it and I think shorting overall still won't work for a while. That's just what we believe to be the truth.
 
When the market was up strong yesterday the advance decline line was hugely in favor of advancers. just what you want and need to see if you have a bullish slant. Today, the Nas was up slightly but the market overall spent almost the entire day in the red yet both the Nyse and the Nas had slightly more advancers than losers. This positive trend has been in place a while now and must not be ignored. It has led the markets higher and we believe will continue to do so near term. Volume increased slightly on the Nas today but nothing worth taking about from a technical perspective. The overall internals continue quite strong which follows a pattern that began three months ago.
 
Bottom line folks is that the buy signal near term remains a go. We are not suggesting 100% exposure as you know due to the problems that are out there but we also believe some exposure is appropriate and we also believe shorting overall isn't a very good strategy right now. Watch 2517 Nas and see if we can take out the final wall of resistance that would allow another 55-60 points of up side action there. Intra day breach isn't enough. A close above is critical and the further above 2517 the better. One slow day at a time. for those of you that held as we did De in to earnings keep those fingers crossed.
 
peace
Jack
 
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