Friday, June 25, 2010
Another negative divergence
It looks like we will get the close I mentioned earlier as there's a negative divergence in the 1-min chart, suggesting a pullback into the close.
Pullback is coming
But the 5-min positive divergence is solid. This will probably end up as a doji day-open and close are nearly the same which is a typical reversal signal.
If you can, watch the market now
It's very interesting. I still feel we will see upside based on the 3C charts, but a late day support level at $107.14 (SPY) just got taken out, watch how the volume rises there as the stops that people place with their brokers (A BIG no-no) all get hit. This is a typical maneuver on Wall Street now-a-days, you might call it fueling up. They continue to prod the area and volume is falling off, suggesting they hit the stops there. Now is the time you might anticipate an upside reversal, but we shall see. It's interesting to watch how they operate and how the "tools" your broker provides are actually being used against you!
Remember, what does Wall Street produce in their factories to make money? NOTHING! Trading is a zero sum game, for them to make it, you have to lose it and a big group just lost it.
***Update -a second after I pressed "Post" the market put in a nice tall candle. Hmmmm....
Remember, what does Wall Street produce in their factories to make money? NOTHING! Trading is a zero sum game, for them to make it, you have to lose it and a big group just lost it.
***Update -a second after I pressed "Post" the market put in a nice tall candle. Hmmmm....
morning update
It seems we'll get a small gap up this a.m. which leads me to believe this is a real move and not a false move as the false gaps tend to be bigger and for a reason, the market makers are using them to fade the gap to make money, a small gap doesn't show that intention.
A break above the $108.75 area on the SPY today would be a fairly definitive short term reversal. We are looking at using UPRO to hedge our shorts and ultimately make a little money on a counter trend move. Seeing as the market typical overshoots normal targets as part of it's shakeout maneuvers, I fell it is possible for a bounce to carry as high as the $112.25 area on the SPY which would be good for anyone wishing to go short the market. I do not think it will cross above $113.20 to make a new high. The target may be even lower and of course there's the possibility it just fails altogether. The financial reform legislation can not be a good thing for the market, except for giving individual investors more confidence, but they account for so little of the trading right now, I doubt it'll make a big difference at least on the upside, especially when compared to the downside of which will be marked by a lot of firms doing a lot of things to get compliant and to find new ways to skirt the bill.
Considering nearly everyone on Obama's team has spent some time on Wall Street, I imagine this is more bark than bite, but there will be consequences-mostly unintended as there always are when the government tries to do anything. It's all a moot point, just as long as we are on the right side of the trade.
If the market begins an a bounce, you can monitor it to know roughly when to get out by using a 50 bar simple moving average on the SPY on a 15 min chart, it seems to work pretty well. Usually I use the close as an indication of when to close out positions but intraday volatility may mean that intraday stops or scaling out on intraday breaches on the 50-m.a. may be more wise. Looking at past performance, even in substantial trends there will be the occasional break of the 50, but only for a little while and the trend continues. So another thing you may wish to through into the mix is the direction of the 50 bar average-as long as it is moving up, any break of it may be temporary. Typically it takes a little time to distribute positions and the 50 will usually go lateral to down at a trend change while momentary violations of the 50 may be false if they occur while the average is still trending up. This is why I advocate a possible "Scaling out" exit, but if you choose that, scale out on the first substantial sign of a break, don't wait for it to drop several percent as the strategy would make no sense at that point.
A break above the $108.75 area on the SPY today would be a fairly definitive short term reversal. We are looking at using UPRO to hedge our shorts and ultimately make a little money on a counter trend move. Seeing as the market typical overshoots normal targets as part of it's shakeout maneuvers, I fell it is possible for a bounce to carry as high as the $112.25 area on the SPY which would be good for anyone wishing to go short the market. I do not think it will cross above $113.20 to make a new high. The target may be even lower and of course there's the possibility it just fails altogether. The financial reform legislation can not be a good thing for the market, except for giving individual investors more confidence, but they account for so little of the trading right now, I doubt it'll make a big difference at least on the upside, especially when compared to the downside of which will be marked by a lot of firms doing a lot of things to get compliant and to find new ways to skirt the bill.
Considering nearly everyone on Obama's team has spent some time on Wall Street, I imagine this is more bark than bite, but there will be consequences-mostly unintended as there always are when the government tries to do anything. It's all a moot point, just as long as we are on the right side of the trade.
If the market begins an a bounce, you can monitor it to know roughly when to get out by using a 50 bar simple moving average on the SPY on a 15 min chart, it seems to work pretty well. Usually I use the close as an indication of when to close out positions but intraday volatility may mean that intraday stops or scaling out on intraday breaches on the 50-m.a. may be more wise. Looking at past performance, even in substantial trends there will be the occasional break of the 50, but only for a little while and the trend continues. So another thing you may wish to through into the mix is the direction of the 50 bar average-as long as it is moving up, any break of it may be temporary. Typically it takes a little time to distribute positions and the 50 will usually go lateral to down at a trend change while momentary violations of the 50 may be false if they occur while the average is still trending up. This is why I advocate a possible "Scaling out" exit, but if you choose that, scale out on the first substantial sign of a break, don't wait for it to drop several percent as the strategy would make no sense at that point.
