This may be one of the most important posts I have ever written here at BOT. There is a key technical analysis event taking place RIGHT NOW in the markets that forces me to tip my hat to the bullish side right now and advise extreme caution on any bearish bets going into next week.
Recently I did a volume analysis of the SPDR S&P 500 ETF (NYSE:SPY) and it was flashing signals to me that the downward force in terms of volume was not enough to get the job done for the bearish case.
Today we are seeing the market rally and assuming the iShares Russell 2000 Index ETF (NYSE:IWM) closes above 60.68 then we will have a confirmed bullish buy signal in the (NYSE:IWM) ETF daily price chart versus the MACD Histogram.
Best Online Trades is going long here based on the current setup and our indication before that we would do so assuming a confirmed MACD Histogram buy signal on the (NYSE:IWM). It is not confirmed as of a closing price but I am speculating that it will be by end of day.
There are other things going on as well. The volume today. It is not even mid day or end of day. But I can tell you right now that the volume on the (NYSE:SPY) is already 140 million shares which is very heavy before mid day. Whether or not we are able to get double this amount by end of day or close to 300 million shares remains to be seen, but it would be a very significant event if we do in my opinion.
The other important analysis has to do with the (NYSE:IWM) Russell 2000 ETF chart structure. Look at the chart below and notice a few important points about this chart structure:
If you look at the (NYSE:IWM) chart there is an important context with which to understand the recent action in my opinion. We have the long term bear market resistance line from the April 2010 highs. This line was BUSTED with a price breakout on 7/23/2010 with two price bars and a sign of strength. Volume was robust but not blockbuster volume.
So you had that initial breakout north from the bear market down trend line in late July 2010. Then, the IWM drifted down lower in a retracement back down to the recent lows on LOW VOLUME in the form of a slow retest.
This drift down created a pattern that looks like a falling wedge formation (shaded in red). Now today we are only slightly busting the top of this falling wedge formation on very robust volume. This is an indication to me combined with the MACD histogram buy signal that we are going to bust through this falling wedge and head for the 66 range on the IWM which is the measured target.
The fact that we have fallen back down in the form of a double bottom and falling wedge on low volume is important. I have seen many stocks behave this way at bear market bottoms. They do an initial thrust higher trying to break out topside from bear market trend but then do a 100% retracement and double bottom retest on light volume. Many times this type of market setup leads to a big topside move.
This post was written at 12 noon Eastern Time today. It remains to be seen still how the market closes and whether or not it can close near the top of the range and on the robust volumes I am predicting for end of day. A lot can happen during the second half of the market day, but based on this new look and interpretation of the IWM I have to take the bullish side here and go with it. The (NYSE:IWM) chart is speaking to me very loudly today and it is not looking bearish at all right now.
The big money will be back in September to take this market in a determined direction. It is still early, but I think they want to take it higher from here and current prices may be the final bear market lows right now.
Could it actually be possible that Glenn Beck, with his Hindenburg Omen talk on 8/25/2010 has actually nailed the final low in this market ????
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