Friday, October 2, 2009

How does one get positioned now?

Well, I am going to be a bit hasty and say that we can finally say that the rally off the march lows is over and the bear market resumes. Now as we can see the first batch of selling was quite strong and we are already a good 65-70 points away from our highs.

Now for us IT traders, the prices over the next 2 weeks do not matter - so in theory one could just go short off the open today for longer term positions and sit through any rallies. It almost seems that I was very wrong and the rally back to 1060+ was indeed the W2 many were calling for which means that we will not have much higher prices in the near future as we start a corrective W4 that could lead us back into the 1030-1040 range (if we are lucky).

I will be giving my position building a lot of thought here in the next 2-3 hours to figure out how to best use more of my buying power here. My perfect scenario would be a rally back to 1034-1038 after we have found our bottom - however, its entirely possible and to be honest VERY likely that we will NOT see this range again. From here on out many trapped longs will have to exit and I do not forsee new dip buyers come in until we reach much lower prices. Even if we get buyers at 1000, or 980 the big institutions will liquidate now that it appears that the rally is over. The next 2 weeks could just be a straight move down with minimal retracements.

My goal is to get committed around 65% on this move down (to give me enough room to hedge on counter rallies). That means another 40% to add here. I may just add 5% on a daily basis here for longer term positions over the next 8 days (5% a day = 8 trade days) which will mean I will be at my target by next friday. Lets see how it plays out.

6 comments:

  1. SPY 1 min chart (from close yesterday to open). RSI at 7 ... do not think I have ever seen that so low.

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  2. I would be careful here. I just have a feeling the gov will save this one too...just like every other look-alike top. Dollar is doing something weird... everything smells fishy.

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  3. yeap I agree. I got stopped out of my long earlier in pre-market and have not changed anything else. Still in my long term puts (finally up a bit on those). No new positions yet.

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  4. waiting for SPY 104.15-104.30 before initiating any new shorts. If we go lower first, they will do so with me under-invested.

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  5. I can see this back testing to 1040-1045 on the S&P.

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  6. I like your averaging strategy. gl slow, if this is real P2 top, we have long way to make money in shorts. I think we see 1010 or so befroe the bounce to 1040.

    some count also calls for 1083-1100 to finish the business. If that were the case, it won't take too long. Mkt is now ripe to do down. It will be much more severe.

    Going short at 1040 is sound strategy for the IT .

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