First we are still in a wicked downtred, evidenced by downtrending 150 day moving average and the distance we are below it. The next thing you'll notice is that we are now in a wedge pattern (lower highs and higher lows). While the green line has provided support over the last couple of months, the blue line has acted as resistance. I've extended the blue line with a red line showing where that downtrend could come into play over the next couple of trading sessions.
We have a momentum divergence, showing that the downtrend has slowed. Until we get a breakout from the wedge that has formed, I would not be too excited about long positions here. And even if we do, our expectations should be tempered because once again we are in a nasty downtrend.
One thing I have been hearing from alot of traders is that we have seen a decline on higher volume. While this is true and volume does give us clues from time to time, we should really be focused on price action. The reason i'm emphisizing this is because we had extremely low volume coming out of the holdiday season. The increased volume from Jan 1 to Jan 20 could have simply been normal volume coming back into the market.
The SMH does look a little more bullish than the rest of the charts, but thats not saying much. We really just have too many conflicting signs on different time frames. Until we get a real break one way or the other all positions (long or short) should be monitored very closely.
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