Thursday, May 28, 2009

Reversal or distribution?

Yesterday
Another strong reversal day that continues to put pressure on the bulls.

"907-908 = combined with the 910-912 this range has been an important turning point and a range to allow distribution to take place. So watch this range very carefully to be able to differentiate between distribution and or buying/selling for a new range."

"Bears on the other hand continue to manage new buyers and do not allow them to break our previous upper ranges above 920"

We traded in this range for the majority of the day and any attempts to break to the upside was quickly reversed by the bears. While we had strong up moves in terms of price from the previous day, just as anticipated the bears took control in the upper ranges and bulls lacked any momentum to try to make their stand.

To take it one step further the key ranges of 902-903 that I had assumed would be protected heavily failed horribly. I had mentioned in the comments that as part of my rules a support point becomes resistance when we have a minimum of a 10 point breach of this level. This occurred yesterday and gave the bears enough buffer to treat the 900 range as resistance now.

Looking at our lower highs we can safely assume that the game plan now is the 880 range, an important point for bulls and bears.

I wanted to quote another comment I made yesterday in regards to support and resistance levels.

"When the market is dealing with a strong resistance point on the upper ranges that it attempts to break we will see consecutive tests at this range with uncontrolled/impulsive sell offs that find support at various ranges but will always lead back to the same upper resistance range. When this occurs the chances of a break of this range are very high.

This is not occurring here, we have quite the opposite. After our first run towards 930 we have been dealing with the same support range at 880 with uncontrolled and impulsive buying moves that stall at various ranges (924, possibly another impulsive move now that may stall anywhere from here to 924). The key is that we have consistently retested the same exact support range of 880 whereas the opposite moves have been to various other ranges - almost uncontrolled (many divergences for volume and other indicators).

So taking this into account, the chances are a lot higher here that the market is setting up for a break of this important support and NOT for a break on the upper ranges. If we were working on a break of the upper ranges we would be seeing similar action as last month when we kept on testing 870-880 with impulsive sell off moves towards various support ranges (never the same).

So in summary - I favor that the market is setting up for a break of the 880 and NOT a break of the 930."

Today
For the bull case to continue a rally is needed before reaching 880. The closer the bulls get to the 880 level the lower the chances are for continuation on the upside. On a close basis we are only 10 points away from this key support so bulls need to step in strong off the open.

The bears have strong momentum on their side now and are setup perfectly for a clean break of the 880 range. If bears fail on this attempt and "chicken out" it will pretty much show defeat giving the bulls the upper hand to take this market wherever they want to.

Support and Resistance

907 = key range at our consolidation zone that should hold as resistance

898-902 = a bit wider of a range here but we have to account for some buffer at the 900 level. A break of 902 will bring us back into the consolidation zone.

880 = of course - nothing to be said here

869 = first stop after a break of 880 that should provide some weak support on the intra day

856 = quite a strong support level that should not be broken on the first attempt. From here I am looking for a retracement back to our key range of 880.

23 comments:

  1. just as an FYI. I am giving the bears until Monday for a break of 880. If we are not able to break 880 by EOD Monday I will take a break from the market.

    One could go long of course but quite frankly I am almost disgusted at the fundamentals we have right in front of our eyes that it makes it very difficult for me to justify investing in value, growth and profit of businesses. Yes there are a few out there that can weather the storm regardless of where we are going but the long picture both technically and fundamentally does not play well into my views of the market and economy overall.

    A failure for the bears by Monday has a very high potential to bring us another 100+ points on the upside - not something I want to be short against.

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  2. samalamadingdongMay 28, 2009 at 10:34 AM

    chaugsy you seem to go back and forth on your views quite a bit. relax...go w the flow.

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  3. based on what I was saying yesterday. Unfortunately this market has made me emotional. And that's a clear recipe for disaster. I am giving myself an "ultimatum" so to speak.

    The same way you have to know when to cut your losses in a position, the same applies to trading in general. With the amount of work I have put in over the past 2 months - and no returns. Something is not right. Always going back to what I was saying before. Market will be there tomorrow, next week, next month. There is no need to chase anything and at the moment I am chasing and its very difficult for me to remain objective and controlled. (look at my trade graph yesterday). I have had those type of emotional swings in the past and taking a break is always the best move.

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  4. as you can see I went back to my old blog format that is purely objective in terms of what each side needs to have. The past 2 months my blog has had very bearish focused reviews - and look where it got me =)

    Emotion is a traders worst enemy. There are many ways of dealing with the emotional aspect. Taking a break is the easiest and least painful.

    "better being out of the markets wishing you were in, then in the markets wishing you were out"

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  5. and regards changing my views. I think you would have to agree that a failure at a 880 break (3 week consolidation) will bring high potential for a new range on the upside. The same as the 800 break brought us to 880 (80 pts), protecting this range here can bring us to 945 and potentially higher - which is also inline with your 980 range =)

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  6. I'm thinking we'll break 880 today so we can profit from this phase....and save you (us) from additional aggravation.

    Steve

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  7. aggravation continues so it seems ...

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  8. You guys are making this hard on yourself because you are trading against the trend. This sucker has been resiliant for almost 3 months now. Keep assuming it will remain that way until proven otherwise (i.e. a break of major support) I think many people have found this market very easy to trade. Unfortuntely I was too stubborn to join them until about 4 weeks ago. The Bear's time will come again. We just can't force our interpretations on the market. The sucker will do what it wants, when it wants. I'm just trying to keep my plan as simple as possible for now: I will remain long until we break 875 with volume. At that point, I will prepare to short the shit out of this bastard. Hopefully that will come soon. If not, that's okay too.

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  9. Chaunger, I think you should take a breather, my man :)

    You are starting to remind me of my state of mind in March/Early April. Come back next week with fresh energy. Sure you could miss "the big break", but I have a feeling this mind-fuckery is just gonna continue for the time being. haha, did anyone catch the clip of Jeff Macke finally losing his shit? I'm sure many of us can relate. I think all this BS finally drove the man into the deep end:

    http://www.youtube.com/watch?v=EWFLfzbZQFI

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  10. Just FYI

    Alert Update: Institutions were in very LOW Distribution with their Buy/Sell SPREAD decreasing. Buying decreased, and Selling increased. Distribution was so low, it was essentially Neutral.

    Wednesday's comments: Remember our comments about a Neutral condition? "I have seen Institutions take the Accumulation/Distribution to neutral and then goose it up again, so be patient while waiting for a short condition." -- We don't know, if they are in fact going to goose it up again, but we can see that Institutions halted the direction from going into distribution yesterday. The Alert remains on because Institutions are close to a level that would put them in Distribution.

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  11. having lunch now ... maybe it was just the empty stomach. =)

    In all seriousness, schismatic, you are pretty much describing exactly what my current dilemma is. I have been too stubborn to follow the obvious in front of me. I mean its black and white yet here I am. Definitely not one of my proudest 2 months in terms of trading lol

    And yeah Macke definitly lost it there. It was meant to be a joke or something but that sure did look like some total crazyness. I was lauging pretty hard when I saw that for the first time. They all going crazy.

    One of my biggest character flaws is my "emotional outbursts" ... takes a lot of work to control this but my tone in the past 2 days definitely goes to show that there is still a lot left in me, no matter how hard I try =)

    Thx for the support. Finsih lunch, nice espresso and a smoke (yeah I know) and I am sure I will be back all relaxed.

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  12. max 909 and low could be below 878 that is a good 30 point swing. Most of the down in closing hours. close shorts today at the close. Friday another opportunity to enter shorts after a rally. this is my plan anyway, if it plays out.

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  13. "[...] but I have a feeling this mind-fuckery is just gonna continue for the time being. [...]"

    the winner goes to schismatic today.

    Going to have a nice bottle of wine tonight and relax after such a day.

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  14. samalamadingdongMay 28, 2009 at 2:28 PM

    sama - are you smoking some funny stuff? what would lead you to believe 880 by 3:30?

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  15. look out for waterfall around 3 pm

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  16. samalamadingdongMay 28, 2009 at 2:32 PM

    no shot...

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  17. ascending wedge almost to the point in hurry.

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  18. samalamadingdongMay 28, 2009 at 3:20 PM

    sama you need 25 points in the next 10 minutes.

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  19. samalamadingdongMay 28, 2009 at 3:48 PM

    once again the perma bears on this site proven wrong.

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  20. samala ... you got me here. neg.divg. ascending wedge failure did not work. wait till next week I guess.

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  21. samalamadingdong, we are always wrong =)

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  22. samalamadingdongMay 28, 2009 at 3:55 PM

    nah sometimes right...just a little stubborn at times.

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