Tuesday Market Analysis:

I was on vacation in Ann Arbor this weekend visiting friends so when I got back on Sunday I didn't have much time to do an analysis so here is the analysis for the week:

As can be seen the OBV has had a very positive trend since 06 accompaning the uptrend. As can be seen recently there were 3 peaks one in July of 07, one in October of 07 and one finally in December (all with purple arrows). To me this looks like a classic head and shoulders pattern with the neckline being the Yellow line sloping downward. It looks like a head and shoulders because of the 2 shoulders that have lower peaks and a head that has a higher peak all of which were formed on lower volume throughout the formation from shoulder->head->shoulder. The problem is that the neckline is coming dangerously close to being penetrated this week but since the close did not happen above the neckline the pattern is still intact. Furthermore it looks like we are in a rectangle pattern with the low trendine at around 11,750 with the upper trendline at 12,750.

The one thing that the bulls have going for them is that where the stocks have paused is right at the 38% fibonnaci ratio which is the farthest a retracement will go to. Furthermore the rectangle has been filled with ligher volume since the penetration of the neckline. Finally the ADX has also started trending significantly lower and if it continues on this trend will cross and will turn bullish.

All in all the theme is this:

1. Pass through the neckline and then 12,750 and we'll be going higher. And the next stop would be 14,000.

2. Stay below the neckline and we'll probably be going lower pushing through the 11,750 barrier on heavier volume. If the 11,750 barrier is broken it looks as if the next level of support is at 10,700 which would be another 10% of a loss for the market and a really horrible start for the 08 year (except for you bears).

Tomorrow will be a really important day and I might update the chart depending on what happens tomorrow...