Wednesday, January 2, 2013
Why The Market Will Pullback After Today's Move
The chart below is the S&P 500 and its 13 EMA, the indicator below the chart is the Percentage Price Oscillator (PPO) which measures the difference between how far the S&P500 is extended from its 13 EMA. I have drawn a red line where the S&P500 starts running into resistance, which the S&P500 is at right now. When this occurs there is almost always a pullback, as past history suggest. The reason is, it takes a lot of energy to move the market this fast (that energy needs to recuperate). Note, not even QE3 in September was immune to this indicator, the markets pulled back hard then. According to this indicator a pullback will likely occur. Also, last Thursday I wrote about my experimental market signal putting in a bottom on Thursday morning, it turned out to be an excellent buy signal. I may be posting more of it in the future more often. In brief, the indicator measures short term buying and selling pressure. Finally, this up move in the market is very strong, based on how I interpet charts, the market should be higher in the future after we digest this up move.