Analysis of the Markets leading into New Week
On May 19, 2008, zachbass (see more of Zach’s work [HERE]) posted the following:
AAPL and the Naz passed the initial test last week, with AAPL bouncing off support and the Naz bursting through critical resistance. We’re in what I call the demilitarized zone, caught between the 200 DMA support and gap resistance on the Naz at 2575.
We only have the S&P 500 left to cross its 200 DMA and put some distance between it before AAPL can start making some serious moves on its gap resistance in the 192-193 range. But there are differing opinions out there as to the state of the markets right now, many doubt the market is going up from here. Here’s my take:
When you hear that consumer sentiment is the lowest it’s been in 28 years. And housing has hit bottom. And Oil is at an all time high.
What does that make you think?
Let me spice it up a bit. We’ve started a minor uptrend, things look pretty good. But the market got really overbought, some negative divergences built up, then there was a selloff.
The volume on the selloff was light, the negative divergences were lessened, but they’re still there. The RSI and other oscillators got reset, but probably not to the extent we would like.
What does this tell you?
In my humble opinion, this is precisely what I want to see and hear. This tells me we are on the precipice of a Bull market.
You see, the stock market is always ahead of the curve by about six months. And a bottom was clearly put in back in March, and we have started the steady climb up. And with pessimism at its peak, the contrarian in me tells me that things are about to get better. And the light selloff was a big clue. The Bears have no conviction. They no longer have a hold on the market’s direction.
So, why is there such pessimism, and doom and gloom out there? Well, that’s because people are hurting. Their costs are skyrocketing, both at the pump and in the store. And the analysts are echoing the consumer sentiment. But the market runs on a different schedule. The market doesn’t live in the present like regular people, it lives in the future. And the future looks bright.
With that said, there are still some negative divergences out there. So, expect a little more selling in the beginning of the week. It may not happen, we may go up. But it would be better if there was selling, because it would give us more room to garner momentum for the next move up.
Did you think that was the conclusion that I was leading up to?
-zach bass
techstock2000 @ May 19, 2008