Tuesday, October 23, 2007
There's good news and bad news with the 2-day chart. The good news is the market continued to rally from Monday's opening low and the market closed on higher volume at the daily high.
However, the market spent most of the day recovering lost ground. Ideally, you want a trend to move more or less continually in one direction. Today, the market opened higher and then fell back. This is not fatal, but not great either.
The SPYs moved through the lower, downward sloping trendline from last week's sell-off. That's another good technical development.
This is real tell -- today printed a hammer, which is considered a reversal signal in candlestick analysis. In addition, today's volume is less than ysterday's volume, indicating a lack of enthusiasm among traders.
The 10-day QQQQs tell a completely different story. Bolstered by Apple's earnings report (which was simply great), the QQQQs opened higher, consolidated, then moved higher.
But the real story is the top line -- which has provided upside resistance for the last 10 or so days. Today's action sent the index right to important technical levels.
The only drawback to this chart is the declining volume. Other than that, we have an index that is moving higher. The question is will the QQQQs continue their upward move tomorrow?
I have to wonder how much of the SPYs move was in sympathy with the QQQQs rather than because of other factors. Apple had been a market darling for the last year and its earnings report was probably one of the first stories traders read today. However, the SPYs' biggest sector is financials, which are not doing well right. This is just a hunch on my part.