Saturday, August 20, 2011

Double bottom, simple ABC correction or something far worse?

A simple ABC correction targets $106 on SPY or ~1057.5 on the index. If this is the beginning of a new long term trend, as the cross overs in the chart above suggest, then the bottom could be potentially much lower. However, I wouldn't be surprised to see Bernanke play some card up his sleeve and send us spiraling higher out of a double bottom. I am posturing bullish at the moment even though I don't think we've seen capitulation yet (on either side). I tend to think that the bull market isn't over yet and that we have one last big leg up, but honestly, these charts suggest otherwise. I'm leaning more towards a fundamental, longer term, argument that inflation should start creeping back up with rates at zero percent for two more years. So I'm not trying to trade these swings but nibbling when there's blood on the street.

Disclosure: Long IWM, LNKD, FSLR (broken charts, I know)

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