Yesterday
The marketed traded fairly sideways yesterday on decent volume. We were unable to even try to reach the 38% retracement. Considering we are so close to this major support line we should have seen more strength. I said I am confident of our direction even without confirmation - yesterday was a great sign for us that further declines are very likly. You remember what has happened in the past 2 weeks whenever we got close to key support ranges that were in the 800-820 range - we rallied fairly quickly. This did not occur yesterday even after we have found ourselves in quite an oversold condition.
If you look at my numbers again yesterday you can clearly see why I am so confident.
834 = this is something the market should break towards the upside, if this is to remain the top we can see a break of our uptrend line by this week
We broke this range on the upside however it was rather weak and we only topped out 4 points above.
842 = yet again a key resistance number we have seen in the past. This should be the top today and could provide the last peak before heading down.
We did not even reach this point after a break of the 834 - that is a very bearish sign showing even stronger weakness. The 838 yesterday may be the top I was hinting at.
Today
We should see further declines in the market place and our premarket is already fairly close to yesterdays bottom ranges. Technically we are still in an uptrend but the market needs to make a stand here - bulls need to step in and match volume on the stronger side - however without outside intervention that takes the market by surprise I doubt this is possible. The past few weeks the market has been immune to bad news. It is my feeling that this immunity has come to an end and bad news will yet again lead the market lower.
We have to be a bit cautious with the 820 range here that we did not give a real test too yesterday. We could see some support on this range. Now, this is something I normally do not do but I am going to include the DOW today as another trade confirmation - the 7800 level on the dow is a substantial support point - the market has only closed ONCE below this point so it is much more important today then the S&P equivalent (around 820 for us). If this will get broken and I feel it will today or tomorrow (unless the bulls have a major rally from here) we are guaranteed to revisit the november lows.
How to trade this?
Do not chase it. Trust me my fingers are itching as much as yours, however the market will retrace - even if it does not, the information it will give us at those key support ranges are worth more then a few % you can gain on a trade. This break will bring us back into new fresh ranges with many amazing chances to make money. So do not chase it - even if it does not retrace back to the 820/7800 levels we know our trend finally and its not the same 100 point range for a 4 month time frame. Considering how important our 820/7800 range is, we should see another test on the upside after we have established a new leg down.
Thanks for the very helpful feedback! Looks like we are getting that retracement of the gap and possibly a fill and fail :-) as that would be an excellent short opportunity
ReplyDeleteI wish I could post a img w/ my comment to show you the chart I'm looking at but ill just describe it now and if by COB today, and more importantly tomorrow, I turn out to be right – then anyone interested can just msg or email me at mayash01.at.yahoo and I can share. The software I'm using is indicating (via proprietary algorithms) that we could see a top today between 2- 3pm some where in the range of 826.50-830.00 – and a huge selloff from there into the close and continuing tomorrow in what looks to be shaping up as a substantially linear day down.
ReplyDeleteGuess we’ll see if I am onto something pretty soon.