Monday, March 9, 2009

Rally looks close at hand...but maybe over before you know it...

We had a nice Bull flag form today. I expect that we will rally tomorrow. The 60 day 60 minute chart shows that we are in a large bullish descending wedge. Volume is increasing in the wedge, which isn't a great sign if you are bullish. Wedges with descending volume have a higher likelihood of their pattern playing out.

What bothers me today is the ISEE hit a 52 week high (220). Basically 2.2 calls were purchased for every put on the International Stock Exchange. This means sentiment is EXTREMELY bullish. The problem is that its a contrarian indicator.

I expect that this rally might be violent and fast as opposed to wave 2 which was slow and choppy.