Technicals | Feb 29 2012
By Rudi Filapek-Vandyck
The Dow Industrials has finally managed to capture the psychologically important hurdle of 13,000 and the S&P 500 managed to close above 1370 this morning Sydney time, but the TechWizard nevertheless believes equity investors are best off proceeding with caution. The Wizard reports there are increasing signs the rally off the September lows is "getting tired".
One divergence that has caught the Wizard's attention this month is between the Dow Industrials and the Dow Transports. Dow Theory states both should move in unison to confirm the validity of the move, but Transports has not followed Industrials in this last leg higher, observes the Wizard.
In addition, the Wizard points out history shows there's a tendency to see late buying orders flowing into the US markets in the final days of February. This may well explain the key indices reaching for their highest levels since May 2008. It all happened on thin volumes too, points out the Wizard.
All in all, his favoured scenario is for a pull back of some 10%, starting next week.
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. All views expressed are the TechWizard's, not FNArena's (see our disclaimer).
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.
