Chart Review 
Anyway, readers want to know where the markets stand today, after the sell-off this week. My view of it — my ‘view’, not my gut-feeling — is that we are, so far, merely correcting from an over-extended rally. This rally has been bizarre, to say the least. This has been a ‘fear rally’ — usually the ‘fear’ side of the equation is when selling comes in, ‘greed’ driving the expansion. But fear of systemic failure has driven this rally; and Ben Bernannke has been the captain sailing the ‘Boat of Fear’, Ben’s logic — that more debt will solve the insolvency crisis — has a shadow side, the logic that a collapse in stock prices will result in systemic failure, international chaos, revolution, repression…made him believe that preservation of the status quo was requiired, at any price. A ‘make-believe’ recovery could be jump-started, perhaps, if the Fed could just stimulate (and simulate) another asset-bubble. After all – that is how his mentor and predecessor, Alan Greenspan, had become the darling of the coctail party crowd, leading member of Time Magazine’s ‘Committee to Save the World’; and that was how he, himself, had become Time’s ‘Peson of the Year’.
Facebook
Twitter
LinkedIn 
del.icio.us
DiggWRONG! and here is why.
The Song Remains The Same, Or Does It?
As we are all well aware the markets continue to plow to new highs with buying the dips and selling the rips continuing to be the trend. As long as that continues, that’s the plan. However at some point that trend will change too.
But how will we know when it changes? Much like we’ve talked about a Double Top or Double Bottom being an early warning alert system to give you a clue as to an impending change in trend pattern, a rising wedge is also an ending pattern.
As we’ve been stating it’s all about buy the dips and sell the rips. This most recent rip has us up basically 8 days in a row. So where’s the dip? There isn’t one as of yet, just more of the Fear of missing it crowd AFTER they’ve already missed it.
As you can see we are still in rip mode.
In addition, take a look at how extended some of these stocks are:
As you can see this is a gold stock, notice how extended it is? Why go chase a bus?
Same here.
Now take a look at two buying opportunities:
PWRD — Perfect World
LIFE — Life Technologies
With both PWRD and LIFE, you can see they have broken out of flat bases. So time to buy right. Well, it all comes down to risk management. If you buy these stocks here, you are buying a new highs with the full stohcastics in mega-overbought territory.
Now compare that to BX which we recently featured as a long set-up:
The difference here is we like to buy stocks that have pulled back to support with the full stohcastics in oversold territory. Notice how BX did just that. The pink line represents the pullback and the blue line respresents support which happened to also coincide with the 50-day moving average.
A break above the pink line triggered a buy on the long side. At that point, we issued a Trade Trigger email alert
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(