Tuesday, November 3, 2009

So what can we take from today?

Well on the surface it seemed nothing really happened but I have to admit, being a bear now you want to take a side of caution. We did not get a breach of Mondays low and EURUSD seemed to have found support around the 50dma (hence my long position there). While we can all agree we will eventually resolve to the downside - at the moment, there really is no trade to take. If you have short exposure lighten up or hedge, if you are long - really take a good look at your positions and tighten stops.

Whats interesting to see is that many of the stocks I generally follow have dropped quite significant in the past 2-3 weeks and are very close to key support and previous month low points. Of course we have a chance for a break, ignoring technical oversold/overbought indicators like we had done during the rally when it seemed every overbought indicator did nothing.

Now whats really interesting on many daily charts is that indicators have come to a rather neutral level with many divergences. Here is where it gets interesting. Lets take a look at SPY.

Of course the standard MACD divergence we have been talking about for a while. Take a look at the last bottoms we have had. 2 spinners before the market took off for another leg up. Now whats even more interesting is the same divergence developing starting in May that made us all believe we will finally head lower back in July and what did it do? It powered through resistance and removed that divergence with a strong rally. I do not expect this to happen here because quite frankly the market had a chance towards mid October to take it higher and actually reversed adding more confirmation of a bearish pattern developing. From here the market would have to give us 100+ points on the upside to balance out the MACD again confirming a new high.

So overall - I am not sure what to make from here. All I know that if the last 2 weeks are signs of whats to come we should get ready for a very volatile month of November - up or down.

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