This week the permabears are having a good night sleep, mainly because the uptrend is finally broken. One reason the bear rally is most likely over because JOSH sold FAZ last week. (OK FINE! NOT FUNNY). Anyways, There are many signs that shows the rally is over (See Chart Addict's "Weekend Observations" post for index analysis). CA has been my TA trading coach since August. (Thanks brother !!)
First, the uptrends in all of diETFs have broken to the upside, some occurring on the highest volume ever.
Second, the volume on the SPY and DIA have been decreasing throughout the March rally. About 40% into the rally, the volume decreased even further.
Third, the XLF hit major resistance at $13. This level is important because it marked the Octover 2008 low, November top, and it is also the location of the 200-day MA.
To top it all off, the VIX is showing major support at the 30-35 level. This level marked the August 2008, January 2009, March 2009, and July 2009 tops (all on the VIX).
The market rallied 40% from the March bottom. Whether it is profit-taking or latecomers coming into the rally, the market looks susceptible to any gloomy news that may contribute to a 10-20% selloff from here. Let's see what the government will do to pump up the market this time.
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