Trying to make sense of this market

I'm looking at the charts and also trying to use the TradeRadar software to make sense of what this market is doing. Here is what I am seeing in the ETFs used to track the major averages.

Examining the Diamonds Trust Dow 30 ETF (DIA), what can we say about the Dow Jones Industrials?

1. Daily Chart / Sell Signal: with the Window Start set to 3/2/07, TradeRadar still shows DIA deep in the SELL zone
2. Daily Chart / Buy Signal: with the Window Start set to October 9, the most recent high prior to the current downturn, we actually get a BUY signal on this short term chart. With the filter set to 4 days, the signal strength is still a little weak but otherwise the indicators look pretty good.
   
3. Weekly Chart / Sell Signal: with the Window Start set to the week of March 5, a moderate SELL signal is flashing
4. Weekly Chart / Buy Signal: not enough data points to generate a signal based on a Window Start set to the week including October 9
5. Moving Average Analysis: for three days now, DIA has managed to close above its 200-day moving average after spending close to two weeks under this important MA. The 20-day MA is still below both the 200-day MA and the 50-day MA. The ETF remains below its 50-day MA which is still pointing slightly down.
6. Support-Resistance Analysis: DIA is just a small fraction above the resistance level (about $134) established by the low of October 22, the high of November 14 and by several days back in August/September.
7. Trend Analysis: DIA has been on a very steep short-term downtrend since 10/31/07. It has clearly broken through that trend to the upside. It has not yet reached the more moderate downward trend line formed by the peak on 10/11/07 and the peak on 10/31/07. With respect to the long-term trend, it hasn't really crossed above the positive trend line initiated at the lows of July 2006.

Outlook: DIA is in rally mode at the moment but there are no chart patterns that provide any assurance that it will be anything but a short term spike. On the other hand, the charts are sufficiently confused that there is no assurance it's not a return to the bull market trend. A follow-through move above the resistance in the $134 to $136 range would go a long way toward confirming the rally.

Examining the SPDR ETF (SPY), what can we say about the S&P 500?

1. Daily Chart / Sell Signal: with the Window Start set to 3/5/07, TradeRadar still shows SPY deep in the SELL zone. The signal strength remains relatively strong
2. Daily Chart / Buy Signal: with the Window Start set to October 9, the most recent high prior to the current downturn, we get a BUY signal on this short term chart, also. With the filter set to 4 days, the signal strength is still a little weak but otherwise the indicators look pretty good, especially the AOA and Trend Difference angles.
3. Weekly Chart / Sell Signal: with the Window Start set to the week of 7/17/2006, a moderate SELL signal is flashing
4. Weekly Chart / Buy Signal: not enough data points to generate a signal based on a Window Start set to the week including October 9
5. Moving Average Analysis: SPY has spent only one day above its 200-day MA and that was Friday. It remains below its 50-day MA
6. Support-Resistance Analysis: SPY has made what looks like a clear break above a resistance level of about $148
7. Trend Analysis: SPY had been on a very steep short-term downtrend since 10/31/07. It has clearly broken through that trend. It has not yet reached the more moderate downward trend line that was initiated on 10/11/07 and that also touches peaks on 10/19/07 and 10/31/07. With respect to the long-term trends, it is still following the up-trend initiated at the lows of July 2006 and is well above the gentler up-trend line established back in April 2005.

Outlook: SPY is looking pretty good to run a bit further but between $150 and $152 it may run into resistance. A break through that area and it would clear sailing and a resumption of the bull market.

Examining the PowerShares QQQ ETF (QQQQ), what can we say about the NASDAQ?

1. Daily Chart / Sell Signal: with the Window Start set to 3/5/07, TradeRadar still shows QQQQ deep in the SELL zone. The signal strength remains relatively strong
2. Daily Chart / Buy Signal: set the Window Start to October 31, the most recent high prior to the current downturn but weeks later than the day when DIA and SPY began to fall. In this case, there is no BUY signal to speak of.
3. Weekly Chart / Sell Signal: with the Window Start set to the week of 7/10/2006, a moderately strong SELL signal is still flashing
4. Weekly Chart / Buy Signal: not enough data points to generate a signal based on a Window Start set to the week including October 31
5. Moving Average Analysis: QQQQ never fell below its 200-day MA but it has failed to move above its 50-day MA. It's 20-day MA recently fell below the 50-day MA, typically a bearish sign. Still, both the 50 and the 200-day are still trending positively, though ever so slightly.
6. Support-Resistance Analysis: QQQQ has stalled at what seems to be strong resistance in the area of $52
7. Trend Analysis: since the high of 10/31/07, the ETF has not really established much of a short-term trend. With respect to the long-term trend, it is still following the up-trend initiated at the lows of July 2006.

Outlook: short-term, we could see some sluggishness in QQQQ as it tries to work its way through resistance around $52. This past week's rally had only a modest effect on QQQQ. Long-term, the trend is still up but there is the possibility that a rotation from tech to finance is underway and QQQQ will the one to under-perform.

Conclusion: The markets are not out of the woods but the charts show great promise, at least for DIA and SPY where we have TradeRadar showing the beginnings of short-term BUY signals. We have mixed results when performing traditional technical analysis. Some of these ETFs are above long-term trends, some below. The moving averages reveal markets in a state of flux. We have certainly seen a great deal of volatility. There are still resistance levels to be broken through to confirm a return to the bull market.

In terms of the fundamental background, the news related to sub-prime, SIVs, CDOs, etc. is beginning to moderate. It is still clear that their are more losses to be unearthed but investors are now taking solace in the fact the Fed and the Treasury are being pro-active to moderate the negative impacts of the continuing issues in the credit and mortgage markets.

All in all, this is a market that still deserves caution. One event could tip things in the negative direction again. If Treasury Secretary Paulson, for example, runs into trouble establishing his plan to freeze payments for homeowners in danger of default, we could see the averages begin to slide back down. I would feel more comfortable maintaining a "wait and see" attitude for a few more trading sessions.

Disclosure: author holds none of the ETFs mentioned in this post