Thursday, May 14, 2009

Where is ze volume?

Ok the bears have an important test ahead of them. We have made our cross on the MACD daily AGAIN and are back to zero. This time around the chances for a cross into negative divergence is VERY high. The chances of another turn into positive territorry are very unlikely - however this rally has thaught is nothing as as it seems.

Additionally we have hour 20 day moving average on the bollinger band that is also coupled with major support via previous peaks in Jan/Feb/April as well as strong FIB levels. Volume wise I am not seeing the confirmation for bears quite yet - I had mentioned in yesterdays post the importance of selling by funds something that has not yet occured and was also confirmed by a fellow reader in the comments. Its as much of a sentimental game now as it is technically.

I have to admit I have learned more in the past 2 months then any other previous time during the market. Money management, risk management and sentiment - all of them major components that needed an important refresh in my trade style.

I had closed out half of my SDS position yesterday - I am willing to take the risk of loosing 10 points here even if that means I have to re-enter at worse prices.

Regarding ranges I am currently looking for. We have a wide range of various support areas ranging from 870 to 880 - the same ranges we had been dealing with as strong resistance last month. Regardless of what I feel long term - for the market to slice through those on the first attempt would be disappointing. We should expect some support of this range and depending on volume we may get ourselves back into the high 890 range. I do expect the 898-901 to be tested once support has been found. Whether this occurs today or tomorrow remains to be seen.

Even with my previous SDS position I have not yet fully invested myself into this leg down - a wounded bear I may say. My major goal at this point is to get myself positioned 100% for this move to come. I am a bit cautious still but there is not much from holding this market back to go lower here. I will be posting position updates and new entries via twitter and a new post here so you can see what I am doing.

Plan for positions at this point is the same as before:

From a distribution perspective here is my split for this long term move towards September.

- 70% SDS position
- 10% SRS
- 15% SKF
- 5% options for various stocks/price/expirations

I will slowly scale out of SDS on support and add more to SRS/SKF on retracements. My anticipated targets for the SDS/SKF/SRS combo are as follows:

- 50% SDS position
- 20% SRS
- 25% SKF
- 5% options

This should be completed by the time we break 800.

At this point I am looking for above 895 to re-add SDS and start the first SRS/SKF positions.

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