In all fairness, there is no way of determining the longer term outcome of recent events which occurred over the past month. There are no doubt long term effects that should result from the credit squeeze which has occurred, sum good and sum very bad but on a purely technical basis the probability of seeing further appreciable price erosion of equities has diminished greatly from the chart action which was engineered this week. The boys did what they had to do in conjunction with the FED and on paper this week. They fixed a lot of apparent leaks and painted a price chart that now looks more bullish than bearish. Whether it is sufficient to stem further erosion later in the year remains to be seen, but for now it appears that further equity value declines have been rendered moot. We’ll begin to see whether the general public buys it once all the folks who went off to sunbath in the Hampton Beaches begin to trickle back into their work cubicles this week.
From the technical chart perspective, we now have developed and enormous “irresistible tail” on the daily and weekly charts that most likely generates an incentive to buy rather than to sell going forward. My interpretation is that we shall travel back up to the approximate area where the PSAR last gave it’s sell signal which is approximately the 1500 SPX mark where the battle will begin anew. That being the case, some bears who are currently sitting on some sizable profits, if they are short from higher up, should book’em Danno and await the inevitable retracement IMO.
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