Thursday, June 11, 2009

Up or down?

Another roller coaster of a day yesterday. Second attempt to GAP above 947 resistance level with a fast reversal that never looked back. Once the selling started it continued on its way all the way down to the bottom of the range. I had posted some charts yesterday with key sectors finding support at trendlines.

While I did take a trade on the long side yesterday I closed it out at my target of 937. I did say that I wanted to see a close above 937 for me to keep the position but it was a bit too close for comfort. We have had quite a heavy sell off in 2 of my key sectors (XLF, IYR), both of those sectors continue to be pressured greatly while S&P is going through a distribution in a very narrow range. As a result I took my small profits and ran for the hills. There are quite a few patterns in play at the moment not only on S&P but also other sectors. Some show potential resolution to the upside, some to the downside. Combine that with the 4 spinning tops on the DOW - its quite difficult to make a call here. "Normally" spinning tops at the end of a trend resolve into a reversal - will this occur here? To be quite honest I do not think so but I am not going to put my hand in the fire for such a call.

Looking at XLF and IYR I am having great concerns that the upside is extremely limited unless the bulls can step in today.

XLF has not been able to repeat the high it made previously and is forming a wedge. Of course wedges here during this rally have always resolved to the upside. Will this time be different? Do not think so but we have to keep this in mind.

IYR is showing great concerns as well. While we did make a marginal new high we broke the low of last week. We did manage to find support at the trendline but the rally was very contained.

I have told myself to stop sounding like a broken record but the rally in the afternoon was occuring on low volume. Compared to the sell off in the morning hours we did not come in with strength. This could have been a lot of short covering as traders are seeing the same pattners and also go with this assumption that there are no pull backs from this rally. If they are, its 30 points max, anything more then that and you are just lucky.

I have to admit, I am not sure what will happen today. 4 spinning tops are a new one for me but they will lead to a strong move in terms of price over the next 4-5 days with a minimum of 40 points. All signs are showing that this move will potentially be to the upside - at the same time its a strong contradiction to my levels of 964 that are just around the corner.

As you know me I always make statements using "should", "could", "possibly". 964 is a VERY strong level for me and it WILL not break on the first attempt. Just as an FYI - whenever you make a strong statement like that you will make mistakes trading as this marries you to a specific view. So keep that in mind =). I guess I am trying to reemphasize how important this level is.

I will post some updates in comments today as the day unfolds for more direction.


  1. be careful on the long side today. I am sitting out here today most likely. We are close to support and have not put enough distance between support and current prices. If we break yesterdays low we have a potential to go all the way to 916-918.

  2. good read over at slope of hope

  3. thisis the best suspense movie you have ever seen.

  4. yeap nice little ascending triangle here OR a stepping day. either way it should resolve to more upside.