Stalemate. 26/5/2010

It was stalemate today. The XAO registered an "inside day". (Today's candle is completely within the range of yesterday's candle.) Given today's stalemate - I have no idea about tomorrow. Let's just wait and see what tomorrow brings. (My studies of the A/D Line and NewHighs/NewLows offered no clues today.) My hunch is - another day of sideways consolidation. But - don't believe my hunches - they're worthless. :)

Now - let's put all that into context.

The ADX (a measure of trend strength) is above 40. A measure above 25 means that the market is trending. (The direction of the ADX has no bearing on the direction of the trend, it is just a measure of the strength of the trend.) The XAO is in a strong trend - downwards. So, the past three days (up, down, inside day) should be read at this stage as a pause in an ongoing downtrend.

Next, the 13-Day SMA is still heading down - signalling that the trend is still down.

Until proven otherwise - we must consider that the trend is down - so the current mini-rally should be sold into, not bought, as so many media pundits (real-estate spruikers in a previous life?) are claiming.

Of course, a trend can change. Divergence on the MACD histogram suggests it could. But let's wait for it to change before buying it.

For the time being, while the trend is marked as "down", rallies should be sold.

Anyhow - that's how I see it. You might think otherwise. DYOR.

Cheers

Red

Cheers

Red