Sunday, April 19, 2009

Rising wedges usually break down...

I know I promised gobs of charts tonight but I only got around to doing four. I'll try to do more this week. First off, as an update to last weekend's post, here is the S&P 500:

As I suspected, the market has continued to float higher on declining volume. In the process, the S&P and other indexes have shaped out a beautiful rising wedge formation and as you all know, those tend to break down before the apex. Now I'm not saying this bear market rally will end this week, 800 is likely to be strong support. But I am saying that if the market rolled over here I wouldn't be surprised at all. A break of 800 will confirm a resumption of the long term downtrend. This week we are going to see a flood of earnings reports and news on the bogus bank relaxation test. It is likely that the media will spin any move as being due to this or that headline but us technicians will look to the charts for guidance.

A couple of potentially bearish looking charts that I ran into tonight were V and GS. V recently broke out of major resistance but has since floundered. It currently lies right at the breakout price but some indicators are giving warning signs. If V does begin to slip and especially if it looses that rising green trend line, I could see a January-esq crash (circled in orange):

On GS, I feel like this is the one stock that you can't bet against because they run the universe, but the chart is tempting. Its got these declining trend lines from '06-'07 just above and it formed a reversal candle on huge earnings related volume last week. Will it get crushed to new lows? We'll see but that's a huge move if it does:

Good luck this week!

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