A Quiet Week Ahead...

The Dow rebounded indeed last Friday following my analysis of the Dragon Tail Formation on Thursday. In fact, it was a pretty strong rebound on strong volume, one that reflected the optimism of investors and the confidence that the government will not allow the market to turn sour. Both the weekly and daily charts support the continuation of the rally and with a calm and quiet week ahead with no major releases and nothing to rock the boat, this could be the start of a healthy rally. In fact, this is a classical continuation of the primary bull trend from a major correction.

However, I had readers challenging me that no matter how good the technical indications look, the fundamentals will still prove otherwise and totally negate the technical indications. This reader (R**lan) is obviously a total amateur at market analysis. That comment is as good as saying "Even though the burnt smell is obviously in the air, one look into the burning pot will prove that the food is still well". Too many people look at technical analysis as independant from fundamental analysis, that's Sooooooo WRONG! Why do I perform both technical and fundamental analysis back to back daily? That's because both are one and the same! Technical indications are produced from daily price and volume changes and such changes are the RESULT OF FUNDAMENTALS! Because something changed fundamentally, investors' behavior produced the technical indications that we see at the end of the day! That is why when we smell something burning, we immediately head for the fire extinguisher instead of saying that nothing is going on! That indication allows us to take precautions to take advantage of the situation before it becomes obvious. Like fire, it is too late when you see it burning right in front of you, right?

Fundamental analysis and technical analysis is one and the same... 2 ways of looking at the same thing, always remember that!