Waiting on the Wedge
Research for Online Investors

by John Dalt

3/07/11

We wondered this morning what the day would look like.  Asian markets were down, except for China.  European markets were up early and futures looked positive for U.S. markets.  We were not convinced.  The unrest in Libya sounds like it is getting worse.  Crude oil and precious metals are spiking.  One of our favorite ways to look at the market is a point and finger chart.

It is a simple way to see where we are.  If the S&P drops below 1300, we have a long way to fall.  I noticed the S&P chart this weekend looked like we had a trend line starting to establish itself of lower highs.  Here is a sharpchart.

You can draw a line from the top on 2/18 down across the tops of the highs (sloping down from left to right).  Then draw a line from the lows on 2/24 along the bottoms (sloping up from left to right).

We have a wedge building that comes to a point.  The market has to break one of the trend lines, either moving higher or falling to create a new trend.  Traders would be advised to watch for the break of this wedge.  This will tell us the short term trend of the market.

The market looks like is going to bounce off the bottom trend line today. Be careful entering trades that may move against you swiftly on violation of these two trend lines.

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The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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