Friday, February 6, 2009

Markets: Breakout

Humble Student of the Markets has some charts of the recent action, and a caveat:
Technicians characterize triangular patterns as a “coiled spring”. Triangles represent consolidation and indecision. Breakouts from triangles are considered significant as they tend to forecast the next major direction of the underlying index or stock.

As I write this, the non-farm payroll figure came in slightly worse than expected but the market rallied anyhow. More importantly for technicians, the S&P 500 staged an upside breakout from a triangular pattern.

A similar breakout can also be seen in the broader NYSE Composite:...
...This bear market rally is for traders only...MORE
Meanwhile, BloggingStocks may be seeing things that I am not. This is a tradable move to the upside and may even be the end of the cyclical bear market but it is not the beginning of a 1949-1966 or 1982-2000 secular bull market:
The evidence is growing that a major rally is about to get underway and the possibility that a major bottom has been made is increasing....
...And there are some interesting similarities to the bear market bottom of 2002-2003: The sideways pattern that began in early October is now more than four months old. And an argument could be made that the consolidation that marked the bottom of the last bear market was extended to seven months only by the Sept. 11 catastrophe, which hit smack in the middle of the consolidation.
The 2002-2003 bottom has other similar technical characteristics to the current consolidation. Both exhibit very high public bearish readings, both have contracting volume at the final low, both have an intraday low and closing low at approximately the same S&P 500 level....MORE
At MarketBeat, David Gaffen posts:

It’s All Good, Right? Right?

The indefatigable optimism of Wall Street is something to behold at times. The market has just been treated to the largest one month of layoffs since the dreary 1970s, which was on the heels of a slew of other global indicators that underscore the depth of the worldwide economic decline. And yet, markets have handled the news reasonably well over the past few days, putting together its strongest week so far this year.
S&P, last five days
Headed into Friday’s action, the Standard & Poor’s 500-stock index had gained 2.42% on the week, and is adding on further gains Friday despite the horrific employment news. The market has also shrugged off a release from the Organization for Economic Co-operation and Development, which noted that its composite leading indicators are at their worst levels since the 1970s, with most economies deemed to be suffering a “strong slowdown.”

“You gotta love the Street: two hundred S&P CEO’s come out the last two weeks saying things are worse than expected, worse than they’ve ever seen, can’t say how bad it will get, and all we talk about is stabilization because pending home sales ticked up and ISM wasn’t in the thirties,” says Kevin Flynn, president of Avalon Asset Management in Lexington, Mass....MORE