Technicals | Feb 03 2012
By Rudi Filapek-Vandyck
There are quite a few technical chartists around who are preparing for a market pull-back. Two of the most cited indicators to underpin such predictions are the fact that all kinds of market momentum indicators are flashing "overbought" in the short term plus the fact that US indices are now within touching distance of major technical resistance. Among regular contributors to FNArena's tech section, Daniel Goulding, publisher of his own weekly The Sextant Report, is convinced equities are now at the early stages of what will turn out a rather sizeable retreat. He's predicting down 10% spread out over one to three months, with potential for more weakness.
However, another FNArena contributor holds a more sanguine view. Earlier this week Charlie Chartchecker sent in an update on what can probably best described as his complex, proprietary set of market signals. These systems, he explained, are designed to start flashing warning signals at either market bottoms or tops when it is time to respectively prepare for a big upswing or to exit. Right now, reports Chartchecker, the equity market is neither here nor there, indicating a pull-back remains possible, but the underlying trend should remain to the upside still.
In other words: Charlie Chartchecker believes any pull-back should remain rather modest and be quickly forgotten about once the present upward momentum re-announces itself.
He also made another observation: crude oil futures have failed to keep up with the upward move in US equities in recent months. This, he reports, suggests crude oil should be playing catch-up.
Of course, playing the Devil's advocate, one can counter-argue this shows equities have temporarily run too hot and lagging crude oil is flashing the message that a retreat will be the path of least resistance, bringing both back in line with each other?
All shall be revealed as February unfolds (not necessarily, but you get the idea).
Technical limitations
If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
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