12/6

12/07/2007, at 1:30 am

As we noted in yesterday’s markey commentary, today both the DOW and S&P tested their respective recent highs for much of the day.  Finally, following the President’s announcement about mortgage rate action, all of the indices rallied strongly to the close.

All of the averages closed back above ALL of their longer term weekly MA’s (20,40,50) after spending much of this month below one or more of those longer term trendlines, and both the DOW and S&P closed strongly back above ALL of their Short-term MA’s (20,40,50).

Only the NAZ failed to show confirming reversal strength by closing right at its 40 Day MA, and still below its 50 Day.  It would be a very good sign if the NAZ could clear that hurdle and close above 2720 tomorrow.

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However… On the “remaining cautious” side of today’s rally, both the DOW and S&P advances today were accompanied by increased volume over WED but still only on average volume.  The NAZ’s advance was on decreased volume vs WED.   This is the only sign of caution we can see and a good reason to wait for a strong confirmation rally with a big increase in volume before making any long commitments.

Many market technicians would contend that we are in the process of making what is known as a classic “Head & Shoulders” pattern, and that we are in the process of completeling the the right shoulder.  In this classic TA pattern, we could expect a fairly meak rally up to around 14,000, mimicing the action of last July, and then we could expect a sustained correction.

Bottom line, in order to return to the good bull run action that we’ve experienced over the past year, all of the averages need to breakout above their OCT highs on increasing volume. 

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The Coach is somewhat dubious that we can muster that kind of optimism and comittment, given all of the bad economy news, to make such a move, at least this year.  It just doesn’t feel like there’s enough positive uumph… to get us there.

Coach BD

Filed Under: Past Commentaries