Friday, January 16, 2009

Are we going to follow through?

We saw quite a turn around day yesterday thanks to our 820 support range. We had hit the first low of the day at 829 (828.91 off by 9 cents). I had posted in the comments any longs should close out here as we will drop lower. We then went straight for the 820 (819.99 off by 1 cent lol). As you could see we rallied but I was getting concerned as the moves lacked any momentum. We had retested the range and broke into 817.04 which is halfway between the 820-815 range that I stressed was acceptable. Here is where buyers stepped in - highest volume day this year and one of the highest volume days thus far in the past few weeks. We hit the 850 range throughout the day with a nice test at that range. I had closed out my long here to protect the gains. I was really hoping to see a break off that range and close right at it or slightly above.

Of course expect a follow through day and another test of the 850 range which is very close. We need to break this range on the upside to be able to sustain a continued rally. The bulls yesterday gave us a glimmer of hope that we need to continue today. So lets make sure its not a dead cat bounce.

How to trade this?
I would place my trades around the 850 range today. Both long and short carry great protection and both are 50/50 - while we had the volume yesterday I still would ask for caution here as this could be topping out soon. Again the best advise for today is to stay out and let the market find its tone. We need strong volume today and a close at least 10 points above the 850 range. That will make me a believer again so we shall see.

This could be setting up like we did off the lows in november so be ready. Wait for any continuation, then try to get in on the retracement back down to previous resistance ranges that should now be support. Here we can enter with a fairly tight trailing stop loss and see how far it will take us.


  1. Are we seeing support building at 850? Do you anticipate a further run-up in the market in the afternoon?

  2. this was as anticipated with a pull back off the peak. We need to see how we trade around the peak today to see if we can get buyers. Its looking good thus far but I would wait for confirmations first. We are only 30 points away from major resistance of 880 so sitting out may be the best thing to do here.

  3. Well I tried my best to be hopeful of the bulls in this market place and now will come back to my normal objective neutral attitude. We have had a lot of great trading opportunities that I could have outlined better if I was neutral again. I will provide a new long term outlook post next week that unfortunately does not have good news. I was hoping to be able to stick that one in the trash ...