Sol Palha talks about the markets. Random analysis of ETF's and Power shares

RANDOM ANALYSIS OF INDICES, ETFs, POWER SHARES ETC.

December 30, 2006

We live in the present, we dream of the future, but we learn eternal truths from the past
Madame Chiang

We first examined this list on July 4^th and then on Nov 7^th

Symbol	Positive Divergence Hourly charts Daily charts		Negative Divergence Hourly Charts
$INDU	No	No	We have a huge array of negative divergence signals on the hourly charts and now the daily chart has flashed a negative divergence signal.
$DJT	Yes. Actually it went on to issue a double positive divergence	No	No on the hourly charts but we do have an open negative divergence signal on the daily charts which indicates that there is still more downside here.
INTC	No	Yes	Several back to back negative divergence signals on the hourly charts
SMH	No	Yes	Several negative divergence signals on the hourly charts.
PPH	No	Yes	New series of negative divergence signals flashed on the hourly charts in the last 18 days. Close to flashing one on the daily charts.
IBB	No	Yes	Several negative divergence signals on the hourly charts.
$ECO	Yes. Double positive	Yes on the daily charts.	No
NENG	Invalidated	No	Yes. This means that it should rally close to the recent highs and then correct. Hence if you took a position in this play sell and lock in your profits. Nov 07, 06 As envisioned it has rallied to its old highs so traders with positions should close them with nice gains. We also have several negative divergence signals on the hourly charts.
$XOI	Yes	No	No
CHK	Yes	No	No
IIH	Invalidated	Invalidated	Negative divergences on both the daily and hourly charts so take profits and close position.
PXN	Invalidated	No	Several negative divergence signals on the hourly charts.
DGT	Invalidated	No	Series of negative divergence signals on the Hourly charts.
MSFT	Invalidated	Yes	Several negative divergence signals on the hourly charts. Very close to issuing one on the daily charts.
IYH	Invalidated	Yes	Yes on the hourly charts and just flashed one on the daily charts.
EWU	Invalidated	No	Yes. 3 negative divergence signals on the hourly charts and very close to flashing a negative divergence signal on the daily charts.
IJR	Invalidated	No	Series of negative divergence signals on the Hourly charts. A new negative divergence signal was just flashed on the daily charts.
EZU	Invalidated	No	Yes several on the hourly charts.
EWW	Invalidated	No	Several negative divergence signals on the hourly charts. A new negative divergence signal on the daily charts was just flashed.
EPP	Invalidated	No	Several negative divergence signals on the hourly charts.
QQQQ	Invalidated	Yes major positive divergence signal flashed	Yes. Several negative divergence signals on the hourly charts. Looks like the correction will provide another buying opportunity.
$SPX	Invalidated	No	Yes. Series of negative divergence signals on the Hourly charts. Very close to flashing a huge negative divergence signal on the daily charts.
$OEX	Invalidated	No	Yes. Series of negative divergence signals on the Hourly charts. Very close to flashing a huge negative divergence signal on the daily charts.
IGN	Invalidated	No	Yes. Series of negative divergence signals on the Hourly charts.
EWZ	Invalidated	No	Yes. Series of negative divergence signals on the Hourly charts.
$OSX	Invalidated	Yes. One of the few markets with a positive divergence signal flashed on the daily charts. The current pull back therefore is nothing but a buying opportunity.	Yes. Series of negative divergence signals on the Hourly charts.
$NYSE	Invalidated	No	Yes. Several negative divergence signals on the hourly charts. It is very close to issuing a large negative divergence signal on the daily charts.
$DWC	Invalidated	No	Yes. Several negative divergence signals on the hourly charts.
EWN	Invalidated	No	Yes on the hourly charts, if the TA indicators can move up a little bit more then the negative divergence signal on the daily charts will be invalidated and the markets in the Netherlands should just experience a normal correction.
EWL	Invalidated	No	Yes on both the hourly and daily charts.
EWA	Invalidated	No	Yes on the hourly charts, on the daily charts it was temporarily invalidated but if the TA indicators do not move soon another large negative divergence signal could be flashed.
EWT	Yes	No	No negative divergence on the hourly chart but a rather big negative divergence on the daily chart. We would avoid the Taiwanese markets for the time being.
EWO	Invalidated		Yes both on the hourly and daily charts
EWI	Invalidated	No	Only on hourly charts. Negative divergence signal on the daily charts was recently invalidated. .
EWD	Invalidated	No	Only on hourly charts. Negative divergence signal on the daily charts was recently invalidated. So it should do well after a pull back.
EWK	Invalidated	No	Only on hourly charts. Negative divergence signal on the daily charts was recently invalidated. So it should do well after a pull back.

Double positive divergence means that two back to back positive divergence signals were generated. Green denotes the index has gained in value since the signal was flashed. Red means the index lost value. Blue means the index etc was just added to the list hence no results are available. Invalidated means that the positive divergence signal on the hourly charts or daily charts is no longer valid depending on what column it appears under.

Negative divergences: A yes means it has taken place on the hourly charts only unless otherwise specified.

Conclusion

This analysis provided us with some rather valuable information back in June and it was one of the reasons we stuck our necks out and stated that the Dow would most likely go on to put in a new series of highs. In June almost all the issues examined above were flashing positive divergence signals on the hourly and daily charts and most of them are trading significantly higher now. However look how the picture has changed now almost all of them are flashing negative divergence signals on both the hourly and daily charts.

We therefore believe that the current sharp pull back is a fake trap for all the dumb money and that we should witness a rather massive short squeeze in the not too distant future that might push the Dow to a new all time high. It’s then when everyone is feeling smug having so easily forgotten what took place in the months of May and in June that the markets will be ready to embark onto a brutal correction. Market update June 14, 2006

We believe that there is over an 81% chance that the market has now put in a tradable bottom. Market update June 20, 2006.

The situation looks bad, the crowd is frothing, the Market pundits are spewing negative news constantly and it looks like all hell could break lose any time. We must remember the proverbial old saying, which states that markets usually climb a wall of worry to which we added the following and crash down a cliff of Joy. Since everyone appears to be worried we have to remain calm and study the action carefully. Our analysis reveals that for now the best stand is to remain bullish. Market Update June 28, 2006.

The Dow needs to break past 11220 on very good volume and stay above this mark for 9 days. If it can do this there is a very good chance that it will test its old highs and then go onto put in a new all time high.

We continue to believe that the NASDAQ will be the biggest gainer when the markets enter the full rally phase. Market update August 1, 2006.

The current analysis leads us to believe that on a world wide basis the markets are frothing, there is just too much money sloshing into the financial markets and a nice breather is needed now. We will have to see how the international markets react as they will provide valuable info on how the markets here in the United States will react. If the overseas markets start to crash then we can more or less expect the same thing here. Right now it looks like the Dow is due for a pretty decent pull back. This pull back though has taken quite a bit of time to manifest itself and when it does it will start very suddenly.