I had spent quite a bit of time last night analysing the past 2 weeks and taking a non-objective approach (yes you read that correctly). Meaning, if I were a believer in the bull what are my justifications for the change of trend and the bottom being in.
Unfortunately this is a view I should have had a bit earlier. Of course hindsight is 20/20, but something that was in front of us and could have been used as an important sign to include in our strategies.
[Mar 10 - Daily Review]
The next step is to continously remain above key ranges with close prices above the 710 range. If we see 3 days in a row with a continued upward trend, even if it is minor, we may have to re-evaluate the mid/long term outlooks.
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[March 2009 - Special: Review of Reviews]
Well after the mid term lows are in I feel the market will find new bulls and new excuses to go long – yes I said excuses. I do see us trading back towards the 741 range [...]
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[yesterday day end review]
There seemed to have been a non-existance of normal sense and following of rules when it comes to market behavior and price action. This is the type of behavior that normally is only present when major market bottoms have been hit or you experience a capitulation type sell off event.
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My bottom call had been for the 620-640 range as stated in January for the mid to end march time frame. Our low thus far has been 666, off by 26 points, with the time target off by less then 2 weeks.
Last year when I had made the long term calls of 764 as the bottom for october and our low was set at 741, a difference of 23 points and off on my time target by 3 weeks.
Yes we did see below average volume the past 2 days during our crazed buying event but that is explainable as the bears covered Friday last week and Monday and the bulls stepped in to set their mark with the bears waiting it out.
I had stated on Tuesday that the technical overbought indicators gave false signals, again another sign of violation that only occurs during bottoming events. MACD on the daily was 0, a sign of either a new trend establishing or continuation. VIX broke the down trend line on the ascending triangle it had established for 2 months and is now moving lower as the market rises (we also violated the double bottom formation on the ascending triangle).
Now looking at the 60 min chart, take a look at the MACD. We bottomed on the MACD on feb 3rd, as we continued to drop in price to our low on Feb 6th the MACD failed to create a new low, a typical reversal sign - same applies to momentum indicator. On that same day (feb 6th) we had a steep drop in momentum while prices only dropped marginally, as prices continued to drop momentum rose sharply - the last sign of a bottom being formed right in front of our eyes.
So after looking at all the data that has been right in front of us we can see that it seems an important bottom has been formed in the market. I added a picture and marked the signs just so its easier to understand.
Today
We have 2 scenarios today, with the most likly scenario of course a retracement as we have passed the important 741 range. Pre-market we are already trading quite a bit higher so expect the top of the day to be marked in the first 30 minutes of trading and then retrace back down towards 745, possibly 741.
The other very likly scenario is continuation in the morning, slight retracement of less then 10 points and either sideways action from there or slight uptrend to close above the open price of the day.
I do not think we will continue with strength on the upside as we are heavily overbought on the short term.
How to trade this?
Even with all the signs of front of me I am not a believer of this rally, I am not sure if you are, but as a result I would recommend sitting it out until we can see more sense back in the market place.
I still hold some of my short from yesterday though had to stop out of most of the position, unfortunately with a bit of a loss. I did not think we were going to be able to get to this level in such a short time frame but it makes sense and can be justified.
Morning. Yeah I had to sell off some shorts EOD myself. Trying to decide what to do with the rest. You think 741 will be our max retracement? Makes me wonder how high this rally can really go. 780? 805?
ReplyDeletewe have the weekend in our favor here as many are going to try to take profits just like last week with the short covering. But honestly, its hard to say if today we will get back to a more sensible enviornment or a continuation of the "crazyness".
ReplyDeleteYou can already see the indecision here in the first 30 minutes. It could be setting up for another attempt to possibly go to 778-779. Do not think it will happen today but as you can see I have not been "on a roll" here this week.
Thanks for the insight, appreciated as always.
ReplyDeletelets see how it continues. High of the day within the first 40 minutes, hit the 745 target already, chances of seeing 741 are fairly high from here but watch for the turn around. Best case scenario for today should be around the 734-736 range.
ReplyDeletehow does this look to you now? up or down
ReplyDeletemost likly a sideways close from here.
ReplyDeleteas you can see we hit our targets, marked the top, support at 741, turn around I was hinting at, retest the top and most likly sell off towards the same close price.
ReplyDeletemy money is on a turn either monday or turnaround-teus, first stop 720's a high probability... now this is where the possibilities fork, in other words if we bounce off 720 and rocket towards 760, then I will be confident that we will touch 770 and possibly the low 800's...
ReplyDeleteon the other hand if we fail to make a new high after the 720's touch, I think we may very well hit your low 600's target range by the 26th +/- 3 days
I am glad I am not the only one thinking this is quite a fake =)
ReplyDelete