Short-Term Indicators Bottom Quickly - IT Indicators Still Moving Lower

I promised to inform you when the Swenlin Trading Oscillators bottom in a concerted move to the upside and it happened already today. I pointed out in yesterday's blog article that the Swenlin Trading Oscillators (STOs) were now hitting oversold territory. This is exactly what we want to see--oversold indicators turning up. However, we want to also see intermediate-term indicators turning up or at least decelerating their descent and that hasn't happened, nor does it look like it will anytime soon. So what does this mean?

Let's first review the STOs. I've highlighted some of our past bottoms on the STOs, and while not each of them concluded with a rally, most did in the very short term. I decided to point out today's STO bottoms because they didn't twitch, they leapt higher which suggests a nice initiation impulse. What I don't want to see happen is a repeat of the STO bottoms in late June. We got the bottom, but it turned out to be a fake out. It took the next bottom about a week and half later to see a good short-term rally. Notice the difference between the STO bottoms and the ITBM/ITVM in late June. The ITBM/ITVM were still in decline and not appearing ready to bottom. However, note that the next bottom on the STOs in early July resulted in a nice short-term to intermediate-term rally. The ITBM/ITVM had begun to bottom at that same time. The most successful short-term signals are usually coupled with deceleration or a bottom on the IT indicators.

So while I believe higher prices in the short term are likely, I'm concerned that we don't have IT indicators bottoming; they aren't even decelerating yet. We may see a repeat of last June. A stutter step or two before IT indicators ripen and begin decelerating or bottoming in concert with the STOs.

Helpful DecisionPoint Links:

DecisionPoint Shared ChartList and DecisionPoint Chart Gallery

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking

Technical Analysis is a windsock, not a crystal ball.

Happy Charting!
- Erin

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