Monday, March 30, 2009

Retracement start or move towards my 400 target?

Ok a lot has happened this weekend. The automaker news over the weekend, the big G20 meeting this week - many have anticipated that any type of negotiations and combined global efforts will fail and it will just end up being a sit and talk type of meeting. It will be quite a strong week for sure with big ranges.

I had made some statements on Friday regarding many of the sectors unable to make new highs. Take a look at some of the crowd favorites, AAPL, POT, MSFT, etc. Those have continued rallying as outside money was flowing back into the markets. However on the flipside many other of the key drivers have failed to make new highs, most of them peaked out Monday last week and traded either sideways for the remainder or with a slight down trend.

Now for our mid term and long term views. Is this the start of the retracement into the mid 700's or the start to our major targets to 480? I for one am still unsure about the moves at least on the short term - long term wise you know there is nothing stopping us from the 480. Keep in mind we are going from one extreme to the next, many traders were extremely bullish the past 2 weeks, can this be reversed this quickly?

We have held up surprisingly well last week after we broke though the 800 however did not manage to follow through to break the upper range of 824-828. This range was a key range that needed to be broken to ensure we can remain above the 800.

We were just shy of our major range at the 838 range which could very well represent the top here - if this turns out to be the top, something I did not think was the case last week, we have to be ready for our major leg down (wave 5) as wave 4 was just completed. You all know that this leg down will bring us quite low and most likly mark the low for the year. If this is the move - we want to be in on it. We do not have the proper confirmations yet for this move - so be careful, first is the break of the 741 on the downside, the last and final comfirmation is the 709-716 range that will give us the last and final confirmation (we will not be creating a double bottom at the 666 but expect support).

I had said last week that at this point the chance of seeing 900 before sub 750 is very likly, with earnings coming up any type of surprise could spur more buying. Even the GM news is not all that bad if you are a bull - chapter 11 allows the automaker to restructure and have a better way to negotiate terms with creditors and contracts that are incurring long term debt. On the flip side, this could cause a ripple effect if the many companies that depend on GM will see no business or write offs over the next 3 months.

How to trade this?
Our futures are already pointing quite low, at this time we are trading below 800 already. We have quite a large GAP at the open so we have to be careful if we want to trade this move. One of my trade rules is no trades in the first 15 min (unless you are exiting due to large GAP in an equity). Within the first 15 min we should see whether or not we will continue on the downside today (very likly) or try to recover some of the GAP (very unlikly).

We still have the luxuary of the 800 range right here giving us great protection. It is very possible that we will be giving the 800-804 a test here if we maintain the current level for futures. If that is to occur we have a great short here that could be a great entry towards the 750 range. On the other hand it is also very likly to have no retracement and just sell off without stopping.


  1. Thanks for getting up this early. How does this look to you now?

  2. its hard to say, very narrow range here ever since the open. When looking at our trade range from 15 min after the open (9:45 is when I normally start) then its supper narrow. Really hard to say - we are already down quite a lot, so further drops are possibly but unlikly. Other chance is a proper retest at the 800-804 range.

    At this point, just wait it out, see what developers in the last hour.

  3. I am thinking that it will test 800 and even close there. This will give uncertainty for the traders and the market has been very good at that lately. Next day gap up or down? Most likely gap down again to test 770 and close there. Too many people have become expert at charts and the market is trying to defeat these day traders. Lst few weeks have been full of gap up or down and flat later.

    would like your opinion.