Thursday, November 5, 2009

Market Weakness

Well what a day yesterday. I had left my computer right around 3:30 or so thinking the FED day was just going to be another non-event with the market closing near the highs. Boy was I wrong.

The weakness in the market is become quite clear here however there are quite a few things that have me concerned. I had mentioned yesterday that it was my assumption that the FED comments would have a larger effect on currency markets and the opposite happened. The dollar remained at similar levels while SPX took a big nose dive. One of my charts I had recently added was an overlay of ES and EURUSD - and both of them diverged yesterday towards the closing hours. This is something I will be monitoring much more closely in the coming days. It is my feel that we may be setting up for something larger in the forex world in relation to the dollar. Many had been talking about call buying on the dollar index yesterday - so someone may know something.

Equities wise - we are struggling to maintain a rally and we still have the same bearish divergences that the market has been unable to balance out. It is becoming more apparent that we will be visiting key support at the 1012 ES (1016 SPX) levels. Until we have made a decision at this range its anyones game. I wanted to remind everyone of the time back in Jan/Feb this year when the market came off the 945 highs and had been fighting with key support at 800. Shorts covered at 800 and re-shorted above 840. Bears are getting more active here but are still very cautious and take profits quickly so a visit to 1012 will cause quite a bit of short covering so do not expect this to be broken on the first try.

Overall - still in no mans land. From Monday the same applies (numbers in ES):

Long between 1011-1013 with a stop at 1009. If that fails long at 1006 with stop at 998.
Short setups 1061-1062 with stop at 1064.50. If that fails short again at 1068 with stop at 1073.

We had taken out 1052 ES yesterday right in the morning hours as we had expected but reversed back below. Currently trading below this resistance level but I feel we may get another test again today.

Take a look at the SPX. We went through the 50dma right off the open but went right back below creating a bearish hammer. Take a look at the last time this had happened back in July. You may remember what I had said on Sunday:

"The largest pull back during our incredible rally was back in june/July for a total of 87 SPX points. Our current pullback comes in at a total of 68 with a low of 1033. You all remember the significance I had mentioned for our 38% retracement level at 1016 SPX - if we do see a sell off towards this level we will be adding a total of 17 points for a grand total of .... wait for it ... wait for it ... yes 85 points pull back - which happens to the same size pull back we have had back in June/July."

Lets see if the market will setup another bear trap here or if we are finally heading lower. Now take a very close look at the 50dma - we are about to turn lower on this average. IF we do visit the 1012 ES which at this point has VERY high probabilities this average will have turned down. This will not be ignored by the large players in the market here and you can expect further selling if we are unable to get back above this average. For the first time since this rally began did this moving average flatten out 100% indicating that the market really is at an important turning point. Bulls need to step in here - or bears will take it away from them.

Is it finally happening? Even if we breach this range - I am a bit more optimistic on the market in general. Yes I strongly believe we will be seeing 880 again in the near future, I think we can all agree on that after such a strong run up. However, I fail to see how we can move into what many are calling the dangerous "primary wave 3" leading us to my old targets of 480. Yes I am saying old targets because I have my doubts. I still believe that we will be seeing this number on SPX but I do not think it will happen quite this fast.

I know I have been slacking off and based on my site traffic I reached the lowest point for this year. Well, expect my participation to change again. Get ready for a new beginning =)


  1. I title the post called "market weakness" and we get our insane rally again.

    I may wait on my short @ 1061-1062. This looks quite strong here price wise.

  2. short here for a scalp. Not using this as a swing position. Looking like higher prices are likely into tomorrow.

  3. FYI watch the relationship between ES and EURUSD. Lower high on EURUSD. Hence my reason to be short here for a scalp. BUT its looking like a stepping day so higher prices are very likely.

  4. someone must have loaded the wrong program on their HFT (high frequency trading) platform. Some weird fills going on with SPY - even when there is no spread on bid/ask

  5. moved stops to break even on both positions ... too much weirdness going on here.