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Bear Flag formation still shows market indecision

We have the 2 day FOMC meeting and the end result is

  1. We didn’t make it pass the 50 day EMA. It is very obvious that is the resistance there
  2. The bearish flag formation made by the 2 red lines still continues to form. This formation typically resolves to the down side.

Where do we go from here?

  1. Negative price sentiments take us straight down to new lows immediately (dark red arrow)
  2. Market continues their indecision and gyrates but eventually resolves to the downside (light blue arrow)
  3. The formation gets invalidated entirely with a break up (green arrow)

I would probably be a bigger buyer at higher prices when (3) occurs. I would probably be nibbling some dividend stocks if (2) continues to play out to see if it brings me to November’s ex dividend period.

(1) is a queue to lighten up on some plays I got in (2) that might able to collect in lower prices.

Notice tat it is important to have a plan should market move in any direction. It reduces the impulsive decisions we all make when the counter trends occur.

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Thursday 22nd of September 2011

So from looking at the bear flag, the conclusion is that the mkt will either go up or down? Duh. Chart patterns are nonsense and could be invalidated in a second and according to the time frame. But I totally agree with you that the impt thing is to have a plan for whatever direction.


Friday 23rd of September 2011

Hi Samuel, the conclusion is the market have a tendency to take the following route (and it is not exhaustive). Laying out would let readers understand that not all moves are definite.

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