Potential for a Bounce in the Coming Weeks


Author Larry Berman

Posted: 12 Apr 2012 re-posted from etfcm

Most short-term indicators suggest a bounce potential for the next week or two. While big picture it seems evident that the markets are developing their next trading top, it is not clear if the bounce can make new highs on the back of okay earnings or if the debt disaster the world is facing will trump during the seasonally weak months again. Our bet is that a head and shoulders pattern will likely emerge in the coming months like we saw in 2011. The timing of it is more the question, not the reason for it—that is painfully obvious if you asked Mario Draghi or Christine Lagarde “off the record.”

Bounce resistance should be strong above 13,000 for the DJIA and 1390-95 for the S&P 500. We’ve stopped looking at the NASDAPPL market for now as it really tells us very little about what is going on. IWO is our best leading indicator right now and it has held important support…for now. A break of this week’s low ultimately targets another 10% decline for the small cap growth index that has declined about 8% from recent highs at this key support! Look to lighten positions further on the ensuing bounce.

 

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