Thursday, August 25, 2011

Technical Update (8-25)

The indices (DJIA 11320, S&P 1177) showed good follow through yesterday. The DJIA remains within its intermediate term trading range (10725-12919). 

The S&P actually recovered above the 1172 recent lower boundary (on the fifth day following the break below 1172) of its intermediate term trading range, confusing me further as to whether it or 1101 will ultimately mark the lower boundary of its intermediate term trading range (usually I use three to four days to confirm a break).

By Steve Cook
All American Investor

An equally important level to watch is 10791, 1120 which was the first higher low following the early August low (10725, 1101). The ideal positive pattern would be for stocks to find a low equal to or higher than this low. This would add strength to the notion that the early August low was the bottom of this recent correction.

Volume fell; breadth was down slightly, as was the VIX which remains a negative.

GLD’s (171) pin action was a stomach churner. It closed down huge. Because the closing price was near enough to the lower boundary of the short term up trend (169), I intend to wait to see whether or not GLD breaks that barrier. If it holds, our Portfolios may Add back Tuesday’s sale; if it trashes 169, the next stop is the lower boundary of the intermediate term up trend (151), so additional sales will likely be made.

Bottom line: three good days in a row; what a concept. Hopefully, this and the fact that 10791, 1120 held and provided a higher low, means that the August lows were the bottom of this correction. Of course, hope is not a strategy, so I am not getting jiggy with that concept. However, another successful test, particularly one the holds above 10791, 1120 will provide a good opportunity to put more cash to work.

The October effect (short):

Steve Cook earned an MBA at Harvard and did post graduate work in economics and financial analysis at New York University. He earned his Chartered Financial Analysts designation in 1973. Steve has 40 years of investment experience including institutional portfolio management at Scudder Stevens and Clark and Bear Stearns. He managed a risk arbitrage hedge fund and an investment banking boutique specializing in funding second stage private companies. Steve now manges Strategic Stock Investments which focuses on wealth building through strategic investments.

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Original content Steve Cook, All American Investor