CNBC might be saying that the selling is over, but...

You know, I rarely watch CNBC. I mean, let's be honest, probably the only thing that group is good for is, perhaps for being the preeminent contrary indicator, if you will, when it comes to calling significant turns in the markets.

But for some reason, I decided to turn on the channel a few times today, for several minutes on each occasion, just to get a feel of what the sentiment was like in the, oh let's call it the "fundamentals" crowd... Almost on every occasion, I heard what can only be described as full on cheerleading for a bounce. Several times in the last hour or two, they repeated a seemingly nonsensical claim that went along the lines of "oh, look, the Dow has bounced 20/30/40 points, off its intraday lows (when the index was down 125 points, on top of yesterday's 225-pt drop) and, since every correction over the past several months has ended fairly quickly, this one must be over - given that the indices have been able to hold the day's lows - now."

Click to read more ...

Chart in Focus: Rising Wedge Reversal on NDX (3)

Nasdaq-100 Index daily chart showing defunct rising wedge formationThe rising (bearish) wedge reversal on the daily chart of NDX, which has been the "Chart in Focus" since last Wednesday, is now essentially defunct.  As such, there will be a new 'Chart in Focus,' starting this weekend.

Before moving on, however, let's take a look at why the formation is now likely defunct.

The index found support from its 20dMA (not seen on this chart), a couple of days ago and since then has moved back towards the minor/intermediate highs that were put in place last week. In order for the wedge to have continued to be seen as legitimate, prices would have had to have stayed below the wedge breakout level of 1615 or so.

Moreover,...

Click to read more ...

Purely Technical: Aug 11th, 2009 Issue

The latest issue of the Purely Technical newsletter is available via the link below. Covered in this issue is the article "Sell Signals All Over the Place."

Purely Technical - Stock Market Newsletter

Chart in Focus: Rising Wedge Reversal on NDX (2)

Nasdaq-100 Index daily chart showing potential rising wedge formationThe daily chart of NDX - depicting a potential rising (bearish) wedge reversal - was initiated as the "Chart in Focus," on Wednesday. Between that posting and the close on Friday, there have been a couple of developments that allow this chart to remain in focus.

The index broke out of the rising wedge (on a closing basis) on Wednesday and then lost further ground on Thursday. Prices looked well on their way towards fulfilling the objectives derived from the wedge. A 1.25% rise on Friday has, however, put the formation in a bit of doubt.

There has not been an "unconfirmation" of the formation as yet, but virtually any gains from current levels will nullify the formation. Moreover, it needs to be noted that there wasn't a surge in volume upon the breakout and, as such, if this is to prove to have been a successful wedge formation traders will not only need to see an immediate drop in prices but also an accompanying rise in trading activity.

Chart in Focus: Rising Wedge Reversal on NDX

'Chart in Focus' is a new feature from TheMarketMessenger.com. We'll provide details on this new feature in the coming days; it's quite self explanatory actually. Now let's take a look at the first entrant into the 'Chart in Focus' segment...

This a chart of the Nasdaq-100 index zoomed-in to focus on what looks like a potential rising wedge (reversal variant), at the end of a spectacular minor trend bull run. The validity of the potential - and we say potential because prices actually have to close below the lower wedge line in order to complete the pattern (and it is presently early in the day) - is given a boost by the falling trend in volume, which is something that is typical of wedge formations.

Assuming that the formation is legitimate, the minimum target from the same is for a drop to the level of the beginning of the wedge (1550-1560). However, given the preponderance of other sell signals on charts, many of which provide the opportunity for much large declines (we've spoken about the same in the commentary pieces provided in the Members Area), we're placing near-term (2-6 week) targets at 1515 and 1400.

Trouble at The Upper Bollinger Bands

The Upper Bollinger Bands on several of the major indices are potential showing signs of trouble. We'd first brought this to the attention of members in the Nightly Commentary piece, last night, when we noticed that the upper bands were curving inwards.

That was quite an untoward development, as far as the bulls were to be concerned. Yet, one had to wait until the next morning to see if the development was just a blip or if there was definitely a change taking place.

Here's what you'd have wanted to be looking for this morning...

Were the bands still falling this morning? In fact, were they even just flat?

If the answer to one of those questions was "yes", then it was to have been seen as a sign that a potential minor top may have been put in place. At the very least, such a development would have to be seen as a big stumbling block for the bulls. It would have taken an immediate rising in the bands to have called for an ignoring of the development that was seen on the chart, last night.

So what has actually taken place after the open today?

Take a look at the charts of SPX, INDU and OEX, below...

Click to read more ...