Please click on the chart for a larger picture
This morning, the market was able to reverse, if only temporarely, the downtrend with a new column of X. This has the effect of negating our channel support estimate of 12,150 [FN-69] (Orange arrow) and reducing the risk substantially to 12,650 [FP-57] (Blue arrow) which is a good thing. Also notice that we only need another 50 points hike to reach 13,000 (a round psychological number) to generate a second positive channel breakout signal of [+2].
If we buy the bullish scenario, then the market has discounted one difficult quarter of economic slowdown. If we get another breakdown below double bottom support at 12,800, then the economic conditions will worsen and we should probably add another quarter of economic softness. Remember (Economy 101) the standard definition of a recession!
Many stocks and ETF gave an early warning signal of a trend change last night which means that agressive traders can nibble at very short term long positions. But we need to build a base here before we are convinced that the winds are now blowing towards the North pole...!
Pierre Bodeur
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