Return of the technical

I have noticed in myself a tendency to write about peripheral matters or avoid writing (or thinking) about the market altogether when one of the following three things happen:

1) The market is extremely volatile

2) The market is extremely unpredictable and I feel I have no special insight into what it's going to do next

3) The market is doing the opposite of what I thought it was going to do.

As it happens, all three did occur at one point or another over the last few weeks. I must admit the latest bout of weakness and its vigor took me by surprise and that the eventual rebound (the one that's taking place now) came much later (and at a much lower level) than I expected.

Add to that the fact that I seem to have run out of exciting charts (and my natural laziness) and you have a ready made explanation for my avoidance of technical market analysis. But all things must come to an end and that thankfully includes lack of inspiration so here we go.

The chart above (it is strongly suggested the reader click on the chart to enlarge so as to have the faintest idea what I am talking about) is the most recent daily chart for Microsoft. After its breakout move on 10/26/07, the day after shockingly above-expectations earnings were announced, the stock looked like it was off to the races but it actually came down pretty hard with the rest of the market. However, starting 3 days ago, it did stage a rally that could be the real thing for two reasons:

1) it took place right at the 50-day Simple Moving Average around 32.6

2) and as the 10/26 gap was almost filled (or the window closed in candle-speak).

I could also add the fact that the RSI has formed what looks like a double bottom at around 45, a level that frequently marks the end of a corrective move within a larger bull move.

Granted, volume has been unexceptional at best and that's a cause for concern. Therefore, we would need a decisive close on decent volume above the previous intermediate high (reached on 11/20) above 35 to call with some authority for a resumption of the uptrend.