Yesterday
[yesterday] Its the third day of this new trend and we need to watch weakness set in here or strength to continue. [...] This will be a great test for the market to determine the strength of the double bottom here.
Well we had major weakness set in yesterday right off the open. We approached the top as a wedge on lower volume before we started selling off. After we hit the 762 we saw a minor rally just to reattempt the 762 - any longs should have closed out here or at least moved up their stop loss as this trade was going against us.
The bulls needed to hold the 762 range and that did not occur, you can see the hesitation towards the afternoon around the 762 - I was looking at the 1 min bars and you could see them consolidating at the bottom with wide ranges and narrow closes - it was setting up for a big move - but I have to be honest I assumed it was a move up as the bulls were waiting patiently on the sidelines. It seems there was only one bull left.
Looking at my review, of course I can justify this move based on what I said - but I have to be honest, I was a believer of the double bottom at least towards the 800/820 range where we would make a decision.
Today & Mid Term & Long Term
Bears took advantange of the weakness and continued to sell into this rally - if you look at my comments on the special update I was warning about this, reason enough to quote it in here because it perfectly applies to yesterdays trade action.
[yesterday] "The dangerous thing with good news is that you will have hopeful buyers step in that do not want to miss the bottom but then institutions and hedge funds selling into those moves as a way to close out large positions. Who will win here? Not the small guy.
The primary trend is down, so any up move will face extreme pressures. We really need significant changes in the market place itself to give the big guys confidence that 1) they should keep their position and 2) buy more. I do not see this type of change occur anywhere here."
Pre-market we are already at the 741 range, it seems the last 2 days was a mix of short covering, some hopeful assumption of the double bottom and a completly normal technical retracement after strong down moves. We barely retraced towards the 787 range which represents our 23% - this is extremely bearish and unfortunately confirms what we have been saying, the November lows will only provide short term support but will be broken FAST.
Now being a bear don't beat yourself up if you are not short, yes we have know this to be a possibility but again we needed to wait for our signs. It seems we got what we were waiting for and the primary trend has resumed again, unfortunately for many longs.
[Jan 21] We will be creating new lows in the next 8-12 weeks and should find it around the 620-640 range
From a timing perspective we could be there as soon as 2 weeks, considering that our double bottom only seems to have been a 2 days event we could see those numbers a lot sooner but I am still sticking to my original calls of 8-12 weeks which puts this number anywhere in mid march towards beginning of april.
So what does this mean for us long term? You may remember I had warned about the possibility of us setting up for one of my primary final targets by summer - something I did not expect would occur till much later this year. The way we trade around the mid 600 ranges will give us great signs of whether or not this will occur. Of course I will be posting more detailed reviews of this once we get closer and let everyone know what to look for.
wow seeing HUGE pre-market moves here. We just broke our 52 week low on the S&P 1 min ago. This was a 2 million share 1-min bar premarket. Something that normally does not occur especially in this size.
ReplyDeletegreat post with great comments.
ReplyDeleteI saw the drop to 740 too.
P.S. hope you were able to resolve your personal issue. :-)
are we looking for a gap fill-then-fail?
ReplyDeleteif you look back at my previous comentaries I had mentioned the 738 range but its not looking like this will even hold. Next level down is the mid 720 range where we should bounce but only short term.
ReplyDeleteI would not try to play the long side from here, in my opinion we can reach 741-742 at best. On the short side of course its quite dangerous too since we are quite oversold, there is a lot more room to go on the downside but I would let the market do its thing here and wait until we have better protected positions. Today is watch and learn for all of us. No need to trade every day.
ReplyDeleteTR you were right. We are getting the luxuary now of having a potentially great short entry at the 752 with good protection. There is quite a bit of buying in larger chunks above ask prices so this could mean we have enough bargin hunters out there to push us towards yesterdays close, filling the gap and of course failing to continue higher.
ReplyDeletewell the question is what will we do from here. 3 trendlines that are struggling to hold the upwards movement, the last level being at 740. Here is where the bulls need to hold, considering its friday I would assume this to break fairly hard towards the downside in the next 15 minutes. Of course not something I would short at this point but rather wait for retracement on monday.
ReplyDeletewell as I said this, 2 minutes later I saw a 6 million share SPY buy transaction fly through. Wonder if that is the one bull we have left here.
ReplyDelete