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[dTraderB]

I am bullish, looking for a bounce off Friday's ST low but the analysis below seems rather 'amateurish' ABREAST OF THE MARKET OCTOBER 10, 2011 Chart Watchers See Upbeat Turn Several Technical Analysts Say Stock Moves Last Week May Signal a Market Bottom; 'Upside Breakout' Ahead? In recent years, they have sounded the alarm over everything from "death crosses" to "Hindenburg omens," warning of a dire future for the stock market. Now, several of Wall Street's technical analysts—the stock-market geeks who scour charts for patterns and clues to future market moves—have some good news for the bulls. They say trading in the past few days suggests the U.S. market may have reached a bottom early last week, and that stocks are destined to move higher. They point to the moves on Tuesday in particular, when major stock indexes were lower for much of the day before staging a spectacular rally in the last hour of trading. Some say that moment may have marked the beginning of a rally into the end of the year. Stocks did continue the rally: The Standard & Poor's 500-stock index finished the week up 2.1% at 1155.46. Technicians, as they are known on Wall Street, focus on stock movements more than they do on macroeconomic developments and corporate news. They examine often-arcane numbers, candlestick charts, Fibonacci sequences and odd formations to predict the market's trajectory. Tuesday, says Scott Redler, chief strategic officer at T3 Trading Group, was an "outside reversal day," meaning the market reached a new low for a recent period before reversing to produce a new high. Such a move "could be an inflection point for a long time to come," he says. Mr. Redler, who relies on technical analysis to make rapid trades on stocks, blasted out a note on Thursday morning arguing there was a 75% chance the markets had seen their lows for the year. "On a technical basis, Tuesday could have been the most important day for the fourth quarter or for the year," Mr. Redler says. While acknowledging market risks from macroeconomic problems like the European debt crisis, he adds, "I do believe the low for the year is in." Many investors may not be ready to believe it. Mr. Redler says his bullish missive drew a flood of angry emails from bearish traders. Meanwhile, analysts at Birinyi Associates, a stock-market research firm, take a longer view and suggest the market is getting primed for what's known as an "upside breakout." They say the stock market has been caught in a "trading range" for two months, despite day-to-day volatility, and while it could meander for a while, in similar situations in the past it has broken out of that range and jumped higher 75% of the time. Birinyi analysts have studied 14 such trading ranges, where stocks essentially go sideways, over the past two decades. They say stocks typically break out and rise 6.2% in the following six months. Outside reversals and upside breakouts are part of a battery of monikers that technicians give to their patterns and theories. The past few years have seen a host of theories shoot to prominence, including the death cross, which foreshadowed doom when the market's 50-day moving average fell below the 200-day moving average. The Hindenburg omen last year predicted a market crash based on a set of indicators including moving averages and 52-week highs and lows. Both those theories were proved wrong—they missed the market's autumn rally last year—and many remain skeptical of chart gazers' ability to spot a turning point this time around. But even some strategists and economists, who rely more on fundamental analysis such as macroeconomic events and company earnings, are backing the technicians this time. They point to a string of improved manufacturing and employment data, capped by the Friday jobs report showing 103,000 new jobs added in September. Some also think third-quarter corporate reports, which unofficially begin with Alcoa's earnings on Tuesday, may provide some enthusiasm. "There is no hint in September's employment report that another recession is starting," Paul Ashworth, chief U.S. economist at Capital Economics, said Friday. Dan Greenhaus, who looks at charts though he doesn't consider himself a technician, has been watching the size of the S&P 500's gains. The index rose 1.75% or more for three straight days last week, just the fourth time it has done so since World War II. Every other time has "marked a significant market bottom" or come quite close, says Mr. Greenhaus, who is chief global strategist at New York-based brokerage firm BTIG LLC. In each instance, the S&P 500 was higher one year later, he says. "I'm a bear, but what I'm saying is that I'd be intellectually dishonest if I came across something like this and just buried it," he says. "We probably could push higher, but you're talking about a small window, and I don't have a lot of conviction in that." To be sure, many investors remain skeptical. Since cratering in August, the stock market has managed several strong rallies, only to see them ebb away amid gloomy headlines from Europe's ongoing debt crisis or signs of economic weakness in the U.S. Doubters have plenty of evidence to point to. Friday, markets sankafter Fitch Ratings lowered its credit ratings for Italy and Spain. Some chart watchers have been warning about a "rounded top," similar to a "head-and-shoulders" formation, both of which are characterized by progressively lower highs before the market takes a sharper turn down. But Ari Wald, an equity strategy research analyst and technical analyst at Brown Brothers Harriman, is among those focusing on the wild move early last week and sees "compelling technical reasons to believe that the low in the S&P 500 is likely set for the year." On Monday, the S&P 500 fell below 1120—a level that stocks have managed to bounce off several times, making it an important "resistance level" for technical analysts. After falling through that level, the S&P 500 quickly fell through another key level, at 1101. But then came Tuesday's jump. "We were a little bit worried that we were staring into the abyss there," he says. "But once we fell to around the 1100 level on the S&P 500, we saw less selling intensity, and then that key reversal."