The market had a nice (relief?) rally today price-wise, but volume was very weak. I’m hearing lots of sighs of relief because of today’s rally but I don’t see much to be excited about if you’re looking at the long side. I’m focused on where this move will begin to stall so I can put out some shorts. It’s been a while since I posted about the MMAs, so I thought I’d do that today. Here’s the current NASDAQ chart:
The first thing I look at is the long-term group (orange). The spacing between the lines shows that the trend is a strong one ( in case we somehow didn’t already know that). The picture is basically the same for the short-term group (green) of averages. Today’s action pushed the NASDAQ above the shortest two of those averages. So the trend is up only for those short-term traders who are concerned with 3 and 5 day moving averages. All I see on that chart is potential resistance areas defined by every single one of those moving averages, including the middle Bollinger Band (blue), which is the 20-day simple moving average.
I do expect the short-term group to converge with the long-term group at some point. That could happen from a big rally or from the market just going sideways until the long-term group drops far enough to meet the short-term group. I won’t claim to know when, or if, one of those levels will stall this bounce, but I’ll be watching for a confluence of some indicators to tell me when to try the short side.
Mike,
I agree, volume was very weak and I suspect that this “upward” price movement will falter tomorrow or in the next few days. Staying on the sidelines is a good idea for me right now.