Monday, January 24, 2011

Top40 end of the week review


First three days of last week produced some sideways trading, making it five all together with last two days of previous week. Thursday and Friday brought us some direction, one big down day and one solid up day. All together, Top40 closed between 10 and 20 exponential moving averages on Friday, while close on Thursday was below 20 exponential moving average, third occurrence from December 1st.

Stochastic and RSI are more or less in neutral position, staying around 50 and together with MACD are still showing negative divergences. My personal opinion is that Top40 will still go down in short term – next week or two. If you check how last correction happened in second half of November you will see that it started with sideways movement, then down day, then market tried to recover and that failed, which was followed with only last two days being strong down days. Don’t expect that market will drop 2000 or 3000 points without any fight from bulls, as they will try to protect their positions in this market.

Dow Theory is still showing higher high and higher low, so trend is still intact, with 50 exponential moving average around 28200, almost paired with previous low. If those two levels are broken, look for more downside to come. On the upside, free money is coming from overseas and that can always push market higher.

Last week I posted Top40 30minutes chart that painted clear picture of rising wedge and potential targets.

Trade with trend!

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