Sunday Update.The Rising Wedge. Bearish

Rising Wedge: A rising wedge is a reversal pattern frequently seen in bear markets. This pattern shows up in charts when the price moves upward with highs and lows converging toward a single point known as the apex. Using two trendlines - one for drawing across two or more highs and a trendline connecting two or more lows - the trendlines will show convergence toward the upper right part of the chart. I will first show you an example, happened last week, with the gold price:

COMEX Gold 100 Oz., Dec 2008: Rising Wedge, Example: The Downside Potential of such a formation, is shown in the chart at the left side, where the "Wedge" is widest.OSEBX: Rising Wegde: Downside Potential (-7,5%) DD Live=223.DJI: Rising Wedge: Downside Potential (-10,7%). DD Live= 9225 BDD=8575NASCOMP: Rising Wedge: Downside Potential (-4%). DD Live=1660 BDD High=1705,75 BDD Low=1528,75Nymex: Rising Wedge: Downside Potential (-15,7%) DD Live=65,62 BDD Low=57,5. When it comes to the Stock Picks for next week, I have to do some more "modelling".

Some of my thoughts: Several mutual fonds often "print up" stocks in the end of the month, so they get “better” returns ( or less loss ) to show to their holders. It appeared so on Friday, with a very strong close in Europe, especially at OSEBX. This transplanted in higher futures trading in US, who had traded at lows for the entire session. DJI had an intence session, with highs up at DD=9418 and lows down at DD Live= 9225. The Bears took control, the last 30 minutes, sending the DJI down to almost where it had started. It could appear to be an "Evening Star" formation, with a slighter higher close. DD Live 9225, has gotten to be a very important level on the DJI, testing it many times on the way up, and also as a support level in Fridays session. The DD 9225 has my fully attention for the week to come. DD High 9418 has been tested two times during last week, followed by a sharp retraction ( "The Mickey Mouse Formation" ). If DJI hold above DD Live for two more sessions, new BDD and DD is required. In the month chart BDD 8575, ( Most Significant Deviation ) is still the Best Dynamic Deviation, in my model.

A lot of companies in the Energy sector has posted strong Q3 numbers, due to the fact, that they had high oil prices during this period, and it is possible to assume that many have covered their shorts, post to the Q3. The offshore sector has also experienced nice margins due to the same phenomenon. Oil majors has negotiated their drilling contracts during an environment with oil price at levels above USD 100, I assume that in the forthcoming period we will se many of the outstanding contracts terminated, and lower rates will be seen.

The focus turned from macro fundamentals to corporate Q3 earnings the last couple of weeks, resulting in a “breather” for the investors, and higher levels on the indexes. I assume "The Warren Buffet Effect" also lured a lot of long term investors to the marked, in fear of not getting in, resulting in higher short term levels and making an intermediate bottom in the marked. Wonder what will happen in Q4?

"Decisions made over the next few months may well shape the world for a generation. At stake could be the legitimacy of the open market itself." Financial Time`s Martin Wolf.

Happy Trading!

Active Trades: LONG TMT Tech Basket U.S (+4,16%) LONG Xcact BEAR (-8,61%) SHORT STL (-2.91%) LONG DUG (-4,68%).

Active trades P/L: (-12,03%).

Executed Trades P/L: (+208,25 %).

Total P/L: (+196,22%).

Terminology: My Dynamic Theory

Terminology: Candlestick Patterns