The graph shows all of the indicators are bullish. We should have one day this week with a large move either to the upside or downside as indicated by the small move in the McClellan Oscillator on Friday.
Two large new events in the past two weeks have changed market direction into a bullish direction from impending bearish corrections. The first was the bailout plan proposed by the Treaury on March 28. As bad as the plan is for taxpayers, it lifted the market. The second was the FASB vote to change the mark-to-market rules for financial institutions on Tuesday, March 31 as I had previously provided warnings. This rule change will provide cover for the financial institutions, but does not change the fact they are loaded up with toxic assets.
We will have a new announcement this week that can change the market into a bearish direction. Elizabeth Warren, who is chief watchdog of America's $700bn bank bailout plan, will this week call for the removal of top executives from Citigroup, AIG and other institutions that have received government funds in a damning report that will question the administration's approach to saving the financial system from collapse. The story is here. This could provide the impetus for a market turn-around into a bearish direction; and we are overdue for a correction.
Can more announcements affect the market? Yes, and what they will be and when they come are anybody's guess. This is a tough market to trade, but overall, I think we are in a rising market with a needed correction in the interim. Given the important resistance prices the market is approaching, I am currently faded into some long positions, but will be cautious with some tight stops. I plan short the financials at an opportune time, perhaps today, using SKF in view of the pending Elizabeth Warren bearish annoucement.
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