Wednesday, June 3, 2009

Distribution or weakness?

Yesterday
The morning started quite strong and had all indications for more ranges and volatility. However, after the first 30 minutes the day turned to a very slow grind to distribute.

"The only pull back we had seen yesterday was a test at the 937 range yesterday - this should hold as support if we continue a bit more on the upside."

We held important support at 938.46 and remained contained between the high and low of the day.

I was watching financials very carefully yesterday and further weakness was apparent with XLF closing in the reds and barely giving a test at the previous close. IYR showed similar signs of weakness.

However looking at the noob index AAPL we have up day number 6. Take a look at the daily on AAPL and look back at the last 6 months. What happened anytime this "index" has been up for more then 6 days? Can this be considered an indicator? You decide - from my perspective I have been using AAPL quite a bit as an indication for trend changes and tops.

Today
Yet again it is not an easy day to make a call today. While the market has built up a nice buffer off the 930 range we still have to worry about a retest of this range. I would have expected a run up into the 950 range first before retesting so we have to see and wait for the market to show is the direction here.

Bulls have a the upper hand here as we are still above the 200dma for 2 days in a row now. Based on distribution yesterday we can expect to remain above this range here but we need to show follow through to make this breakout stick. This includes bringing the lagging sectors above their current top ranges as well. Unless the bulls can make a stand here across other sectors we should see downside pressures arise soon.

For the bears it is a bit difficult. A few advantages exist especially in financials and sectors that caused this crisis not able to break above key resistance ranges. As we are increasing in price and distributing the crisis leaders (financials, real estate) are showing further weakness. This could setup for a nice reversal if other sectors fail to make new highs. At this point bears have to be patient and let this pattern come to a closure point before making any calls.

Special Note
I had mentioned the dollar over the past few days and we are seeing further weakness in this area. It seems we are not the only ones that have picked this one up so many are watching this closely. Be aware that a the dollar is currently trading at key ranges and should find support. For bulls this is a major concern at the moment while the bears are on the edge of getting a big advantage here if it does turn in their favor.

Support and Resistance
Just going to state numbers here as many are repeats. I am adding one new one on the upper ranges.

964
956
947
937
930

11 comments:

  1. How does it look to you Chris? we have seen the LOD?

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  2. opened a small SKF/SRS short at the open. Long via ES now. Will keep on adding to SKF/SRS during the day. Expecting it run back at least to 940. Here I will make a call for direction.

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  3. samalamadingdongJune 3, 2009 at 10:22 AM

    sama - what are you doing up so early? look at the 915-920 range to cover shorts.

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  4. I had to drop a guest at the airport. so might as well. and try to minimize the loss and go on the green side. thanks smala... I think a strong bounce and down again here.

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  5. Disclaimer: this is my bear view talking here.

    Do not think there will be much of a bounce off here - 10-12 points max only on intraday. And everyone will be looking to go long at the 907-924 range. Get a small bounce back to 924 and then continue lower to break 900 by end of this week.

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  6. I agree. that is my plan. i am out of stupid put options for now. In spx calls. will buy puts again at around 3 to 4 pm and should see big down by Friday 3 Pm. time to go long for a short ride.

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  7. Hi Chris and others, been following you for a while. Rarely post though. Can you talk a bit more about the dollar? Support and where you see it going? Relation to bulls/bears? Thanks!

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  8. Rally time until 3 Pm and then close below LOD? Chris?

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  9. samalamadingdongJune 3, 2009 at 4:02 PM

    sama - you need to take a little breather...market is getting the best of you. market bounced right off the 200 moving day to close strong. up day tomorrow.

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  10. Market does it again. Unbelievable. Didn't go short yet, but lightening up on some longs.

    Hope everyone has stayed out of harms way lately. I gotta catch up on Chris' posts.

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  11. i AGREE WITH YOU SAMALA... . i CASHED OUT ALL OF PUT OPTION POSITION. NOW CAN RELAX.

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