Thursday, August 27, 2009

Breakout or breakdown?


We continue seeing overall weakness and indecision. It appears we are forming either a descending triangle or a penant. The penant would make a breakout to the upside more likely while the descending triangle would support a breakdown. On the daily chart everyone is calling for our 3 spinners here at the top. Which one will win? I am not sure.

I have to admit I see no edge for either bull or bear today. We have a LOT of information to absorb pre-market today so my call would be for a very large GAP outside of our existing 3 day range with a stepping day. I think we have a 3+% day in the making with 60% of the range done by the GAP today.

For Bulls & Bears: No edge for either side and news will drive the market today. I think by the end of this week we will be able to justify the breakout/breakdown technically regardless of news, but I think the news events today will be ultimately responsible for this move. Many are saying news does not affect markets and is already priced in - yes that is definitly possible but the times we are in at the moment are driven primarily by emotions.

8:30AM will be the time to watch futures. I would expect a minimum of 10 points to either side within the first 2-3 minutes. Wait until this move has completed if you want to play either side. I am still positioned very bearish but may decide to hedge myself here pre-market.

3:08AM: Ok another thought on consolidation versus breakout. We had been consolidating around the 1014 range for 3 weeks previously and broke out but only by a mere 25 points. To top it off we have only been trading around this 25 point breakout peak for minutes over the past 3 days and all closes we have had were only 10 points away from our previous consolidation zone. The chances of another consolidations right after a supposed break of a major resistance level are quite slim. IF the last 3 weeks had been a consolidation for a break higher we should have had at least two strong higher closes like we had on every other previous breakout in the past.


  1. Just a fine good morning to you!


  2. morning steve. another hour and 45 minutes before this crazyness will start. This rally has respected the upper trendline now for 5 months - its either time to break it (cause everyone expects it to hold) or reverse here after having completed 5 major cycles (not EW cycles).

    Everything points to a decision this week, more so then ever before.

  3. well market is totally flat now compared to yesterdays close. We did sell off a bit to retest the morning low from yesterday but recovered it all.

    Globex really does not give us any signs into what investors are thinking. The only positive thing is that we did not break out strong on the upside.

    At this point it will be totally news driven. Either the jump to a 1040-1050 range today and a jump back to below 1008. Both are in the cards. Of course my account would prefer the move down but it will just mean I have to sit through some more pain and get eaten by theta burn on my puts.

    Ok bring on the news now =)

  4. I do have a feeling it will bite me in the arse (again like every other time) and the market will interpret the numbers positivly.

  5. well I have to admit I am quite shocked that we had no response from the market besides the small jump. What will it mean for us? Well we could continue the grind which means we have to assume more risk as a bear for further upside this week.