The market is at a very critical point currently.  I have seen many market technicians sending out reports lately showing  reasons 'why' the markets may be ready to rally.  The technical evidence they are using to come to this conclusion are indicators such as the Bullish Percentage Indexes, Volatility Index (VIX), 50 day moving average indexes etc.  They could have a valid point.  BUT, be very careful trying to trade off of these indicators at this time.

The problem with using these indicators at this time is that the indexes have very possibly ended an 'ending diagonal' pattern with the recent highs.  The pattern has been mentioned in many recent ShepWave updates.  (Read Update Part I from last weekend for a review of this pattern from the lows of October 2002.)  Ending diagonals retrace to the beginning of the pattern very quickly.  For the Dow Industrials index this would take the Dow to the low 7,000 area within 2-3 years.  Also, as shown on July 12 (shown in ShepWave Stockcharts.com page.  CLICK HERE for the charts.  The Nasdaq Composite hit the minimum Fibonacci Retracement area of 38.2% of the sell off from the all time highs in 2000 to the low of October 2002.   We also saw the ShepWave Fibonacci Extension target of 14,051 almost get hit by the Dow (actually hit 14,021, close enough).   From the point of that all time for the Dow and the minimum Fibonacci Retracement of the Nasdaq we saw firm selling pressure enter the markets.   The Dow and the S&P 500 indexes both had 'outside down' months in July; which is also a potentially very Bearish indication.

The goal at ShepWave is to show how to trade/invest objectively.  In tonight's update I will show some potential BUY SIGNAL TRIGGERS and SELL SIGNAL TRIGGERS for tomorrow.  I reinforce this information at this time to encourage strict, objective and disciplined trading.  Although we are at oversold areas indicating that we could see a rally we are also at a very precarious place in the longer term view of the markets.  Please use STOPS that meet your risk tolerance to protect any and all positions whether LONG or SHORT.  The recent Mid to Long term trades we have entered are all well in the Black.  Just don't lose profits.  Read Update part II from last weekend if you are a mid to longer term trader for Targets and Signals. 

Go to www.shepwave.com for Updates, Targets, and Analysis

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