Calmer heads seem to be prevailing on Wall Street as the sheer panic atmosphere is now be replaced with realization that governments around the world are getting a grip on the banking crisis and that the ridiculous overspending by the US consumer may have finally come to an end.
There is no doubt that the recent technical damage done is significant. Ironically enough, markets are often most volatile tops and bottoms and I do believe the recent volatility, coupled with the negative sentiment and seasonal issues suggests we are in that bottoming process.
As the chart above illustrates, we have now established a trading range (83.58 to 99.10) to work with. Should the market move through either of these points we shall be given a new signal to work with. One should trade accordingly.
My hunch is we shall break higher once the US election is out of the way in early November. The market has been tentatively promised a stimulus package by the new congress and at that point there should be some clarity of leadership with the US executive office as well.
Should the seasonal bottom come in as expected one may find significant resistance at the bottom of the old trend channel. As pointed out in last weeks offering, there are three significant technical barriers at or near $110 on the SPY.
That's all for this week,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the-rational-investor.com
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