Ian Woodward's Investing Blog

The Greek Gods are Smiling on the Bulls!

Just when the Bears had the Bulls on the ropes, up pop the Greek Gods to smile down on the Bulls and stop the rot that could have set in.  That does not mean that the danger of a further drop has evaporated, but until the problems with the various Eureopean Economies are settled including Portugal, Italy, Ireland, Greece and Spain there will be unsettled markets across the globe.

     picture

The Bull and Bear fight for turf can be summarized as follows:

1.  After a downturn from the high of close to 8%, the Market bounced for two days with a very tepid dead-cat bounce as I described in my last blog.

2.  This gave the Bears confidence that the 11 month rally had stalled and it was time to look to the short side and nibble at the QID, SDS, and other similar ETF’s.

3.  Having shot the VIX upto the famous 30 mark where we reached recent crossroads, low and behold the Euro/Dollar situation turned around with rumors that the Germans would bailout or at any rate assist the Greek Government with its Economic woes. 

4.  This led to a strong bounce today at the onset, with a precipitous drop in the dollar and resulted in a new relief rally for the Bulls who were literally on the ropes.

5.  As I show in the attached chart, the Bears still have the upper hand and we must wait to see what transpires these next three days with the long weekend ahead of us. 

vix

6.  Despite the decent rebound today, the Bulls must show courage to drive the S&P 500 Index to at least the 1100 mark, and that is only the beginning in trying to recover the internals of the Market which are now badly oversold on most fronts.

7.  The gauge of the Fear Factor would seem to be that the VIX must subside to below 23 before there would be short covering by the Bears, who have the ball at present. 

8.  The QID has risen from the ashes and is stirring slowly; it had a set back today:

qid

I trust you are all using the wc chart to spy the rotation that is taking place and what better way to see it than to look at the QID (and SDS, which have identical patterns):

hgsi

If the market continues to go down, the winky winky is not to forget to watch out for a Bingo to see some form of Capitulation.  In a Market Rally with a Minor Correction you will watch for a single Bingo followed very quickly by an Eureka (or the more the merrier) for a renewal of the rally.  However, in an Intermediate or Major Correction, expect several Bingos and Phoenix before there is exhaustion to the downside.  We came within a hair’s breadth of a Bingo yesterday on the NYSE, until the RSI 19 was driven back to over 40.5 today…so no cigar. 

Remember that the -8% mark is at 1058 & -10% is at 1040 for the S&P 500. 

Now you all know what to look for until I write the Newsletter this weekend!

Best Regards, Ian.

One Response to “The Greek Gods are Smiling on the Bulls!”

  1. ian Says:

    Ian,

    The internet can be a wonderful thing. Along with several others at an investment seminar in Chicago, you taught us about Black Spot Disease. It has served me well and kept me from getting too infatuated with certain stocks.

    Another favorite recollection from the seminar was when you held a piece of paper up covering the right half of a stock chart with a very powerful upward trend and then asked us where the stock was going. None of us technical analysis geniuses one guessed it would drop like a rock the next day.

    I am glad I found you on the internet and could take this opportunity to thank you.

    Sincerely,

    Rob

    Hi Rob: Your note sure brings back 15 years of memories, and I am glad the basic “good stuff” I taught you several moons ago has stuck forever with you. The likes of ERG, Black Spot Disease, Rust and High Jump are still as fresh as they were then and remain the foundation of my Keep It Simple teachings, though of course we have now progressed with new ideas when you fast forward these fifteen years. Many thanks for taking the time to drop me a line.

    Best Regards, Ian.

Copyright © 2007-2010 Ian Woodward
Disclaimer: Commentaries on this Blog are not to be construed as recommendations to buy or sell the market and/or specific securites. The consumer of the information is responsible for their own investment decisions.