Market commentary for 06/01/2010
Friday's action was in line with expectations. The day began without a gap and that was a signal for a 60 min correction and a pullback to the 20sma support area. The moment the indices broke the 20sma support we can see on the charts support held that turned into a possible bull flag pattern and a bounce for a 3rd buying wave from the low. We can see that on the DIA
60 min chart (blue lines). If we focus only on that time frame it will be the scenario I will focus on Tuesday. It is important to watch other time frames too.
On the daily charts we can see the 200sma is still resistance for the DIA (weakest action so far) and for the SPY. The QQQQ action is the strongest and the daily chart suggests buying continuation next week. We can see the CCI divergence setup going well and we know that on a CCI setup generally the target is the 20sma and the indices have room for it. I want to note that is not a rule, but very often we will see at the least 20sma. On the daily charts I will expect to see more upside action until the 20sma resistance area. So far it looks like the best buying action will be with the QQQQ.
Now let’s look at the weekly time frame charts. No big difference for the DIA and SPY, but the QQQQ shows nice strength. All three indices have formed a strong pivot pattern which suggests last weeks low will hold for some time. I know that is still too early to suggest that, but the scenario that is described on the DIA weekly chart (head and shoulder possibility) is something that we can see, especially after last weeks bar. All three charts suggest for more buying that is in line with the daily and 60 min charts. Unfortunately I’m not sure that we will see nice clear intraday buying action. I think it will be more tricky action like we had last week, but my bias remains for upside action (generally) and intraday sharp pull backs and bounces to new highs.
Wish you all good trading!!!