subject: Time for a market change? [print this page] Time for a market change? Time for a market change?
There has been a huge amount of volatility in the stock market recently. The S&P500 rallied from its summer 2010 low to the first week of March, 2011, then the horrible tragedy of the Japan earthquake, tsunami, and potential nuclear disaster struck not only the financial markets worldwide, but the world as a whole.
Global stock markets plunged the first week of March, with the Nikkei faring the worst by far - down a shocking 17% in one single trading day! Japan's stock index has since recovered some of its losses, but is the worst over for Japan, and the rest of the global markets?
During the correction, the DJTI fell into a 65% False bottom configuration - which suggests this rally very strong for these markets. Since then, the DJTI have broken out of their trading channel and may consolidate once again, but it could be a head fake to the upside.
The S&P500 is a different story. It had a recognizable head fake to the downside, and the professional traders have showed enough buying activity to possibly stop this downward movement, and start its next leg much higher. The S&P500 will very likely finish the year far above its current levels, we believe.
According to our studies and other market related information we track shows that we could see the S&P500 correct down to the 1220 area eventually. However, there are many reasons for a rally from here up and out of resistance. There is a lot of uncertainty in the world right now, and plenty of resistance to go around - but that makes a perfect formula for the Smart Money to push the markets higher, trapping all of the unaware bears going short.
Other reasons the markets could continue to rally in the short term is that the market makers have been buying this correction by the handfuls - the market turns direction typically because the pros figure out how much it will cost them to obtain up all the available shares. This process is literally what stops the markets from falling, and sends the markets into a sideways direction, which can last days or weeks, forming a bottom in the markets.
With the government pumping in newly fabricated dollars into the banking system, they will stop at nothing to keep this party going higher. According to our most recent indicator readings, they point to a strong upthrust above and beyond key resistance levels.
