This bear market rally has a little more un-winding to complete before a potential short-term base is formed. Extreme overbought readings (especially stocks above their 50-day moving averages) require some time to settle back. Waning momentum, signs of divergence including Dow Theory non-confirmation provided clues to this retracement. We have been short SPY, QQQQ, RTH, long Dollar and FXY, and have sold calls on extended stocks. Staples and healthcare have shown strong basing and some breakouts. Volume on the downside has not been extreme, a positive sign. At this time (subject to change), we expect an orderly correction of the uptrend rather than a retest of the March lows.
Link to Market Tour on Stockcharts.com
Updated 06/18/09 market close.
COMMENTS AND SYMBOLS GUIDE: GREEN BULLISH, RED BEARISH, BLACK NEUTRAL.
Additional research at www.baselineanalytics.com.
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