Tuesday, July 28, 2009

Higher lows streak

There is not much to go on currently as we appear to be consolidating near the highs. Today we finally made a lower low and lower high on the S&P. If one were to look at the chart only, it may offer a glimmer of hope for shorts as well as bulls hoping for a pull back to relieve overbought conditions. However, it is likely based on the numerous interim term buys on the board that any significant dips (~2%) will be, or rather should be bought. While i am not seeing any notable odds based on today's close, I do see one short term positive based on yesterday's close.

Yesterday marked the 16th time that the S&P painted 11 consecutive higher lows. In all but one case, the S&P was trading higher within 3 days. Given that today was a down day, the odds strongly favor a close above 982.18 on the S&P within the next two days.

This occurrence also has intermediate term implications. Looking 2 and 4 weeks out , similar to the ST odds, the market has closed up in all cases but one, adding to a slew of intermediate term buys that are on the board currently.

TickerDate/TimeClosePctChg N1PctChg N2PctChg N3PctChg N10PctChg N20

The only caveat with the above study, is the time between occurrences. the last time this signal was triggered was in Nov 2004. Thus, there are not many recent occurrences.

We are still rather overbought here and could use a solid down day to relieve those conditions. But based on the recent studies, dips should be bought.


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