As I've mentioned before, observers of financial markets speak of "critical junctures" on, it seems, a daily basis. I try hard to refrain from using this phrase often, but I sincerely think we're at a key juncture at this point, based on the charts.
As a preface, I will note that complacency is as low as it has been all year. The $VIX dipped down into "the teens" again for only the second time in 2008.
Let's look at the bullish case first. Some people have pointed out inverted head & shoulders patterns. The cleanest one I see is on the NASDAQ Composite, shown on an intraday basis below. A clear break above 2,450 or so would be disastrous for the bears. A fully-realized breakout would send this index hundreds of points higher.
A somewhat shoddier inverted H&S is presented by the Russell 2000. But note both the chart below and above have prices getting very near major resistance lines as well. So there is certainly a yin-yang tension at this point.
Lest I get the bears too scared, allow me to show the next graph, which for me is jumping-up-and-down bearish. Plus, it's a daily graph, not an intraday one, which obviously has far more import. This is the High-Tech index, and this is about as clean a head and shoulders pattern as I've seen in a while. Now, this pattern may have already been fulfilled by the nearly 100 point drop in January. However, the retracement – which has been hammered out over virtually the rest of 2008 – is all the way back to the neckline. This strikes me as a delicious shorting opportunity with relatively low risk.
A somewhat similar retracement is exhibited by the Dow 30, although the pattern is not nearly as clean. Dow 13,000 has been a very important line in the sand, and in spite of the Dow's strength today, that line was still not crossed.
My bearish disposition toward the gold market paid off again. My puts on ABX and $XAU had good profits (about 50% and 100%), and although it's entirely possible I got out too early, I'd rather be safe than sorry. A break beneath $170 on the $XAU may suggest a farther drop to $150 or so. This is a decent H&S pattern, but before you get excited, look immediately before it, and you'll see a somewhat similar pattern that didn't lead to jack squat.
Poor Jana – – battered by China. Your redemption may be at hand! Looking at either side of this line, it's almost like a error image. The reduction of a stamp tax (what is, this, 1775?) is a silly reason for a market to go up. Come on. Get real.
That's all from the Timster. I haven't done a video in ages. Just haven't had the time. If we ever get a real blowout day, I'll probably be giddy enough to do one. Until then, text will have to suffice.
