Technicals | May 13 2010
By Rudi Filapek-Vandyck
There simply is no two ways about it: the world has changed over the past few weeks and the TechWizard is not on the positive side of the market.
It is rather his observation that investors are increasingly becoming uncomfortable and nervous.
As such he is inclined to expect one more half-baked rally after which US equity markets will roll over and turn negative.
Why? It is his personal view that the world's financial problems will likely prove too hard to handle and that they'll come back with a vengeance and starting to impact on confidence and economic growth.
His two favourite potential scenarios are for one more high or for equities potentially carving out a nasty head-and-shoulders formation on price charts.
The big rise in the VIX volatility index, points out the Wizard, is a clear sign all is not well in today's market. In addition, he observes base metals prices have failed to recover and crude oil is finding the going tough too.
One important signal to look out for, says the Wizard, is if the Dow Jones Industrial Average would manage to post a new high, but the VIX index would not fall to a new low. This would indicate that traders do not believe the surge is real and sustainable.
All this is likely to play out over the next four to eight weeks, predicts the Wizard.
A weekly close for the Dow below 9900 would seal its fate, he adds.
The TechWizard is the pseudonym of Scott Morrison, whose experience in financial markets exceeds twenty years. Morrison operates his own website nowadays at www.techwizard.com.au
