Friday, February 20, 2009

ST Bottom ?

I think so ! But that's just my opinion. The daily and the hourly trends are still down.

Since i called the Jan top, a day after it topped, i have been consistently bearish and have been calling for the retest/break of NOV lows. I did not find any trades on the long side worth playing from a swing perspective and so never played them.

Now today, based on my technicals and the way i view them, i would call the retest of Nov 08 lows complete, which i have been pounding the table for weeks. Now how the restest happened, gives me clues as to whether the Nov 08 lows will hold or break. Firstly it has not been an impulsive downtrend from the Jan highs, rather a torturous sideways to down trend. It was a struggle all the way down. We have not broken any of the NYSE MCO divergent lows so far, despite the DOW already having made a low and SPX coming close to it today. The VIX today peirced above the upper daily BB and closed below it. The P/C ratio again which pierced above the upper BB and closed below it. The volume on SPX was climactic. With such humongous volume one would have expected a wide range bar on the daily which did not occur. So someone clearly was absorbing all that volume. The NDX touched the lower BB on daily and smartly reversed. Now why didn't the VIX explode? Are the options folks stupid ? These are subtle clues. They never ring a bell at the top or bottom. Did they during the Jan top. How many really beleived that we would test the Nov lows back then ?

On the sentiment front, from a subjective viewpoint, what i have been seeing on the web is extreme bearishness. What i found rather interesting is many folks are now using the catchphrase "The trend is down !". That bravado at the bottom, when the SPX hit the 3-sigma lower band on the daily and the lower BB on weekly ?? That kind of bravado rarely plays off. The trend traders would be biting their nails in anxiety at these junctures or taking partial profits at the very least.

All this to me says that it was a wave B or wave x, with a wave C about to commence to the upside. That is also consistent with the 9 month cycle cresting sometime in March.

I normally don't comment on the VST stuff on this blog. But i could not help noticing the divergent low on the hourly and turn up. The 10-min charts gave a continuation buy, suggesting a gap-up on Monday. If we gap-up above 780 on Monday, that would also constitute an island reversal and would also produce a hourly buy signal. There are many big IFs at this point, which should all be resolved Monday morning.

Dollar and Gold

Looks like the dollar index topped out today for the ST. This would mean a trip back to the 78 levels again. I think GOLD will also commence a downtrip along with the dollar. I am still an IT bull on the dollar and think it will hit 100 sometime this year.

Good luck !

Tuesday, February 17, 2009

Heading into the 9 month crest

In my Feb 7 update,i wrote,

From a ST timing perspective (daily charts), the current momentum has about 2-3 days of rally power left. If that rally tags SPX 880-900 area, i will be looking to short that area. Or if we breakdown from here and take out SPX 840, then i will be shorting into weakness.

We topped 2 trading days after my update. Now we have broken SPX 800. On one hand while that looks bearish, on the other hand we have the 9 month cycle heading into the crest. So it's not going to be a straight-down kind of an affair here, i am afraid. Rather i would expect some kind of a sharp bounce here, another bear-flush-out rally, as we head into the 9 month cycle top, which i am expecting around mid-March. I still beleive that this top would hold below the Jan 09 highs.

Once the 9 month cycle crests, then it's down all the way into the fall. Cyclicaly and from structural perspective, not to memntion the trend, the market looks very bearish heading into the fall this year. Trade safe.

Bottomline, i am expecting some kind of a sharp bounce here over the next 1-2 weeks before the big kahuna bear resumes with full force. VST bullish. ST - IT bearish.

Happy Trading !