Friday, August 28, 2009

Hello Traders,

This evenings post will be a weekly wrap up. let me preface by saying that many people don't bother using Tick charts that show this many Ticks (6765), but I do, and I find it works really well. Why the number 6765? Because it's in the Fibonacci Sequence (Its the 20th number). What's the Fibonacci Sequence? It's a sequence of numbers defined by the recurrence relation in the equation fn = fn-1 + fn-2 where n>3 or n=3. Ok? You know what..just Google it. The general idea is that the sequence appears throughout nature, (In flower pedals, rows on a pine cone, and even starfish) so it should make sense for it to appear in the markets. Now we all know that markets don't behaved in a predictable pattern, buts its a good starting point for analyzing market data. Math lesson over, lets go to the charts...

We entered the week over-bought. SMI's where pegged in the high 60's, low 70's. After the initial pullback, bulls tried to get things going again early Tuesday. The rise in price set up a nice divergence (marked with white lines) for shorts. On Wednesday, I identified 1016 as a target on a pullback as well as a possible head and shoulder's forming, that could portend much lower prices. By 10am Thursday morning price had reached the 1016 target and the dip buyers stepped in. Last night, I said look for a gap up early Friday, which we got. Price faded nicely and now SMI's are showing a bullish looking formation with short term MA's pointing higher.

Even though we ended the week essentially where we started, I think the action was positive for bulls as there isn't much good news left to cling onto. They managed to defend the higher prices well. especially the breakout level 1016. I will be checking out other charts and reading a lot of news this weekend. Also hoping my home state of Pennsylvania gets a budget passed before the G20! I will likely post Sunday night with some predictions about next weeks action. Enjoy your weekend everyone

$ Nate

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