Monday, March 23, 2009

1014 on the S&P !!! Say what?

Not much more to say, broke 785 pre-market, opened up, tried to do a small retracement and of course saw the perfect GAP example I explained previously. GAP open up, retrace down slightly, mark low of the day and just keep on rallying. Rallied towards 800 as expected. Here is where I would have said "ok enough is enough" but not yesterday. What I had assumed would require 2 weeks to occur happened in a 4 hour time frame.

While I had to take a VERY painful loss on my short I had no choice. I really did not believe in this rally, but at this point too many signs have occured. Maybe we were reading it correctly over the weekend, the FEDs wanted to give this market the needed nudge to bring it across the 800 range.

Regarding the 800 remark in the comments, let me restate it here to make it clear [queue up the sound of a broken record] - there is trading above 800 and there is trading below 800, its that simple - of course include margin of error for a few points but you get the point. 800 is one of those ranges that give amazing protection. We have spent a long time around this point to make it that important for the markets, we know that, investors and traders know that, and the feds knew as well so it seemed.

Whether the details for the plan mean good things for us on the short, mid or long term, the market gave its first answer. Considering that since the announcement in February when we were trading around 860 we are now only 40 points away from that point after the details the market wanted had been provided.

Lets do some charts

green = Inverse head and shoulder pattern
blue = plan was first announced, plan details now available .... only 40 points away

Here is where it gets interesting ...

blue = (I changed my RSI top value to 60) Highest RSI since May 2008
green = 10 and 20 dma racing to meet the 50dma for a cross (extremely bullish), strong breakout on 50dma, take a look at the last time that happened - something looks familiar
white = highest momentum value in our recession

Looking at the title of my post today - "1014 on the S&P" - I am not joking, it could very well be in our cards here but we need to give it some more time first before we can confirm such a big move.

Well it becomes a bit more difficult now to forecast what we are going to do. I still believe that the 800-820 range is as far as we can go on the upside at least short term wise. I do not expect us to continue on the upside here. There are quite a few scenarios ahead of us we have to account for.

Continuation - this of course as mentioned is very unlikly and would mean that we would have a very small retracement before 11:15, mark it as the low and slowly trade higher into the high 820 range with a close above yesterday. If we retrace beyond 808 on the downside this scenario becomes almost impossible.

Sideways - this is the most likly scenario today with the market trading in a narrow range between 817 and 800, 795 is possible but should reverse quickly above the 800 range again.

Major retracement start - if we end up retracing down today and close below the 800 we have to be cautious. From a technical perspective this of course is very possible and very likly but as you can see, the market and technicals do not get along too well at the moment.

We have to watch volume carefully today yet again, while we had incredible gains yesterday volume was a bit on the low side considering we broke a major resistance point and rallied this strong.

There is one more possible scenario in the cards today, a suckers rally, very unlikly but if it is to occur a present for all of us. If that is to occur we should rally off the 804-808 range, break 820, top out anywhere from 824-828 and break down hard around the 1:45-2:15 time frame to start a major retracement that could lead us all the way back to 760 and below. Of course expect me to provide intraday updates today for the various plays that could occur.


  1. looks like the continuation scenario is playing out here??..we had a small retrace to 809 and now moving slowly up

  2. still not sure to be quite honest, while we are holding the 808 as anticipated (double bottom too) it could just be mere sideways action (817 as the upper targets). We have not broken out of that range quite yet.

    I have to be honest, the chances of a suckers rally are getting better and better. Continuation required a bit more strength behind it, this morning in the first 45 minutes I assumed it was setting up for a strong move but it retraced the entire length of the up move there.

    So I think from here its sideways or suckers rally. Continuation is less likly, breakdown less likly as well.

  3. Thank you for clarifying it.

  4. back on the highs now. Lets see whats going to happen.

  5. looks like ready to make new high. Do you think it will close high?

  6. need to be able to differentiate here between suckers rally or continuation. We are nearing my time and price target for the top at the moment so we have to watch out. I am not seeing enough volume here today with strong committment. So it may be setting up for a strong break down.

  7. do you think this is good entry point for short like FAZ or SRS?

  8. it just made lower high and lower lows and then higher high fropm there. it looks like to a target fo 824 to 830?

  9. looks like 795 in the cards? and then up?

  10. And the winner is the suckers rally you were talking about... major selling into the close.

    Helpful analysis as always. Looking forward to tomorrow.

  11. Chris,
    The S&P sold off a bit in the last 15 mins. Is there any significance in this?

    (Jim Cramer once said the last 30 min of trading is reflective of "smart money" aka fund managers)

    Any opinions/insight would be greatly appreciated.

  12. :( frustrating day today, got myself infected with a virus last night and took down quite of bit of the netowkr at work which required me to disconnect computer at 13:30, just before my topping target. So I saw nothing of all this action. We are still above 800 so we have to see how we trade here tomorrow. Would not be surprised to see a big gap down and just continue on the downside towards the 785 range fast. As always more details and review coming tomorrow.

    Glad we got today nailed !!!!

  13. Another great playbook for today events, I see. So what's the game plan for tomorrow :)

    Had to take a day off after the coma I was beaten into yesterday. Learned a valuable lesson -- unfortunately a limb was lost in the process. They grow back, right?