Week In Preview - January 26-30, 2009

Well it's Sunday night. It's time to take another look at what's coming down the pike for the week. Let's start with the chart as pretty much everything you need to reference is on this one image.


Okay - so things are looking a little uh - flat - shall we say? You always here me say the market can go up, down, and nowhere at all. After the volatility of the last couple months I think most people are pretty pleased with a no-direction market. Frankly with the new president taking office I kind of half expected to see some movement. But maybe the country is just standing still waiting to see what his first big moves will be... who knows. Let's look at what the chart is telling us.

For starters the most important thing about this chart is the support lines drawn off the low back in Oct. 2008. That support was basically confirmed 4 days in a row this week. Not only that we have the tops of those days forming a pretty decent descending wedge. Occurring where it does on the chart I take this to signal a potential bottom. I'm not going to be surprised to see this guy bust a bull move in the next few days - probably tomorrow.

Here's my reasoning:
1) 4 days in a row confirming support
2) Tuesday/Wednesday formed a candlestick tweezer
3) Thursday/Friday formed a small wedge
4) All of this is occurring at the major support line which coincides with the long candle day from Oct. 10, 2008.
5) Thursday/Friday both had long lower wick candles indicating some strength from the bulls could be mounting
6) Wednesday, thurs, & Friday could look a lot like a falling three candle pattern. Remember it doesn't have to fall with 3 days in the middle to basically mean the same thing. Monday, Tuesday, or Wednesday could easily bust a bull move and complete this pattern indicating a pretty decent little bull trend is likely. (If you remember the falling 3 is the same candle pattern I recognized and wrote about back in Sept. predicting the October bear trend - only it was a falling 3 instead of a rising 3)

All of that to say this week should be pretty interesting. I'm pretty confident we're going to see some movement one way or the other this week. I would tend to expect bullish - but if we break that support line we could certainly drop down another notch to establish a more solid support around 7500.

I'm going to continue trading pretty flat strategies this week, although I may throw in a couple bullish trades if things set up well. As always it will be interesting (and fun!)

As always, happy trading.

J-Dub