11/18/2008

Finally we're seeing some accumulation in the market

I am noticing subtle signs of market strength over the past month, and I think we are close to putting in a significant low. I last posted about the overall market here.


Notice on the daily chart (above) that price has been in a range for the past several weeks. Note the 5 accumulation days, where the market closed up on higher volume. William O'Neil says that when you see 5 distribution days in an uptrend, you should get ready for a decline. I posted about this phenomenon several times this year in real time (see here, here, here, or here). I don't see why the reverse logic shouldn't hold true, i.e. 5 accumulations days in a downtrend would portend a sharp rally.

Also, notice that MACD has diverged with price, and that this final down wave may be an ending diagonal. If price resolves these patterns as normal, we could be in a for a very strong rally very soon.

Now, I have to say, this is contrary to what many people are expecting over the near term. I am reading a lot about expectations of a crash to below 800 or so. Well, if everyone's expecting that, who's going to sell to push prices down???

5 comments:

pennybandit said...

Great call! How high do you think the s&p will go over the next few days?

Anonymous said...

Nice, i feel it the same way. i hope we are right...
Anyway, i remember when everyone were waiting for break out 14000 on DJ and now we know it was double top...

Narayana said...

I'm not celebrating unless it happens haha.

Anonymous said...

still 20/20 up/down. but mostly traders wait for down side

Anonymous said...

similar accumulation comments found at http://marketkarma.blogspot.com/2008/11/sp500-volume-volatility-nov-14-2008.html