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I Have One Year For You: 2008

That November 2008 chart continues to work – so let’s review.

The Market

I promised myself I wouldn’t show you another historical chart here, but I can’t help it. The reason? That November 2008 chart continues to work. We got that one week 20% rally off the low followed by the pullback and now followed by another rally.

I should point out that it shouldn’t end up looking similar in that the shape of the chart will look quite different – and it already does. But it took weeks before the market headed back down and that’s the focus here.

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Away from that, let’s talk about Monday’s action. We had 90% of the volume on the upside, which is a positive. The McClellan Summation Index saved itself from rolling over and instead turned back up. It now needs a net differential of advancers minus decliners of negative 2,200 to turn it back down, so there is a cushion.

Also the S&P 500 crossed that downtrend line that I drew in. I drew in the same one for the PowerShares QQQ Trust (QQQ:Nasdaq) last week. Here is the QQQ chart again. The next serious resistance area shows up around $200. On the S&P, it’s around 2700.

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There will also be a great debate as to whether this is an island on the chart of the S&P. I am going to say, yes, with some caveats. That’s because there was trading there the week prior. For now, I would think support for the S&P is around 2500, which would be a retest of that downtrend line this week. That number goes down as time goes on.

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What wasn’t so hot? Breadth. Sure, at positive 2,450, it was a good day, but two weeks ago, the S&P was up 6% – as opposed to Monday’s plus 7%, and net breadth was positive 2,550. It’s not a big difference, but when we look at the chart of the cumulative advance/decline line, we can see that the S&P is higher than it was a week ago and breadth is lower. We’ll watch that.

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I would not be surprised to see the market back off on Tuesday, as it is short-term overbought. The intermediate term is still not overbought, though. That chart is shown below.

New Ideas

Also, I forgot to note Sunday that there is another basing chart out there – there will be more as I find them – and it is Biogen (BIIB:Nasdaq). This is a chart that based, gapped up, then spent the last five-to-six months in a trading range. Think of the Goldman Sachs (GS) - Get Free Report chart we looked at from the 2000-2007 period on Sunday; the last several months would be the equivalent of the period after GS finally broke out over $75, ran to $90 and then backed and filled between $70 and $9.

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Amazon (AMZN:Nasdaq) has gotten up here once before and had been rejected. I am still waiting for that gap to fill at $2,100.

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The SPDR Gold Trust (GLD) - Get Free Report acts just fine, but there is resistance not far overhead and the Daily Sentiment Indicator got to 90 Monday. I suspect even if it can get through that resistance, it won’t go very far over it. I’d get more interested on a retest of that downtrend line.

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Today’s Indicator

The 30-day moving average of the advance/decline line is discussed above (the intermediate-term overbought/oversold trend).

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Q&A/Reader’s Feedback

Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.

Shopify (SHOP) - Get Free Report did not fill the gap at $375 and bounce, but gapped down under it and is now filling it on the way back up. It is trapped in a triangle, so it should make another try for that $425-$430 area. What would change my mind is if it cannot rally up and over $410. If it fails at $410 or less, then I think the chances of it breaking the lower line on the next trip down goes up. Otherwise, trading range.

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Boeing (BA) - Get Free Report filled that gap near $125, (actually it more than filled it by going to $120), but it made a higher low. The big test is not at $170-$180, where the downtrend line and the prior high are. For now I’d look for it to stop there.

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The oil and gas exchange-traded fund XOP (XOP) - Get Free Report is a different chart and quite interesting. We looked at it recently, with the thought that as long as it held $30, it was worth a trade on the long side. No, the key is getting up and over $37. That doesn’t make it home free and clear, but it would be the first higher high in three weeks, so it changes the pattern. I would love to see it fill that gap at $50, but that might be asking too much. The OPEC meeting is Thursday morning.

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