For a few weeks now we have been watching the market trade in a well established channel between a high just under $100.00 and a low near $83.58. The market popped up above the high end of the range just before the US Presidential election and then ( just as one was starting to feel a little bit more optimistic about things) the market broke straight down to take out the important low at $83.58 just last week.
For the Bulls, the fact that the lows were taken out means we must start the construction of a new bottom all over again. So going forward, we shall use the lows of last week as our new bottom of the trading range $82.09. We ought to see a nice rally away from the lows then a test of this low and then a turn back up above the rally peak before we can get a buy signal. All this says to me is that we probably won't get a seasonal bounce in the market until well into December. Novemeber options expiry is coming up this Friday 21st and the market ought to remain skiddish into that.
For those agressive bears, the break of $83.58 represents a new intermediate sell signal, with your associated stops just above the pre-election peak of $100.86. This is indeed a monsterous bear flag pole formation which suggests prices need to come down to the $54.50 area! [(129.96-83.58)-100.86]. Ouch!
In summary then, new weekly sell signal suggests recent potential bottom has gone away. Bulls should remain on the sidelines while bears can play (what I consider to be high risk) the short trade with an equally aggressive short target of $54.50.
That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com
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