Tuesday, September 29, 2009

One more day for decision

Well we closed right at our key range of 1062. I had mentioned those levels previously and was quite surprised to see them reached this quickly. As a result of the fast (yet low volume) rise I have closed out more of my shorts yet again. I am currently back to less then 30% invested on the short side and will wait out the next move.

From here, it is actually quite an easy range to figure out how to position yourself. We have 1052-1053 SPX on the lower side, 1062-1067 in the neutral mid range and of course our upper ranges from 1071-1074 and the last bit at 1080.

A breach of either one of those ranges and add another 30 SPX points. At the same time we have some other important levels right at our door stop with DOW at 10K. I have seen many blogs refer to yesterdays move as a Wave 2 pattern to retrace the required 62%. I disagree with that scenario for quite a few reasons.

1) this was not a corrective move but instead rather impulsive (even on low volume)
2) if this is a W2 we have to apply the proper W3-W5 length ratios and I cannot see the market slice through those important support ranges on the lower side for this to evolve into a larger 5 wave play.

Whatever this is, whether its an ABC (to go to 1055 first and then new high) or some other type of pattern - does not matter. We have too many important ranges around us at the moment from key support and resistance (previous top and the 1040 support), emotional DOW levels etc.

So from here on - wait for the market to break out of this range before committing any real capital. There is no need to chase it and risk precious capital at this point. I have learned this lesson the very hard way and lost more then 50% of my capital over the past 6 months. Yes 50%. That is substantial and totally unacceptable. Goes to show how easy emotions can get the better of you. Its ironic that the majority of those losses came from Mid July to (the 880 overnight debacle) to now - less then 200 points of market moves - yet such a large loss. I went back through my past history and never had experienced such a large loss per SPX point. Yes its frustrating but its an important lesson learned for me. Its only money right? (lol yeah I know does not work).


  1. I think we see ES 1070 today that would be it. will cash in the long from last night.

  2. yeah agree, as anticipated this is looking more to be a correction off the main move to continue higher.

    Seeing that HUGE drop at 10:00 - and no follow through really shows that the bears do not have the upper hand (or the bulls not wanting to take profits).