friday fiasco, page-83

Hi Folks,

The following are excerpts from my regular Weekly Stock Market Report:

. . . . Caution!

The charts are now showing four possible reversal signals:
1. The weekly Slow Stochastic is overbought.
2. The daily Slow Stochastic is overbought.
3. The daily Relative Strength Index is overbought.
4. A negative divergence on the On Balance Volume.

As we now have a good buffer below the current level of the XAO any pullback is likely to be shallow and supported by the 5900 and 5700 levels.

However, a deeper retrace could occur. If the following four conditions exist:

• negative crossover of the Weekly Slow Stochastic,
• a negative crossover of the daily MACD,
• a negative break of the new up trend line,
• and a break below 5200

I would suggest an exit from the market is warranted. I don’t expect that to be required, but one should always be prepared for negative alternative scenarios and be prepared to act upon them.

Given the action of the past month, I believe that any pullback will be a buying opportunity. It would now seem to be “buy the dips” time. . . .

Conclusions

The market trend (on an intermediate basis – two to four months) is still bullish.

This is not without risk. There has been some deterioration in some indicators during the past week while the Index has continued to improve. The weekly Slow Stochastic is now seriously overbought (not necessarily a danger in itself – but a cautionary sign). The daily Slow Stochastic is flashing an overbought signal. Daily RSI is overbought. There is a negative divergence on the XAO OBV.

We may be in for a dip in the next week – but at the moment the momentum of the XAO is still up.

The intermediate trend is still up.

Anything can happen on the stock market. Continue to watch the indicators.

Cautionary Notes:

Money Supply in the U.S.A. as measured by the M2 continues to contract. This is not conducive to a Stock Market Rally in the U.S.A. If their market retreats we are sure to follow.

Cheers
Red