Wednesday, April 21, 2010

Preliminary sell again

I had said i would update if there's any change in the trend resumption scenario. As i said in my last post, we resumed the trend upwards, but today we had a momentum failure near the highs. Momentum failure in itself is not a sell signal. It can just cause a high level consolidation before the move up. But when some key EMAs crossover along with momentum sell, it suggests that the correction can be something more than just high level consolidation.

For instance, today we not only had a momentum failure but the 3/13 ema pair on 30-min crossed over as well. That suggested that the downmove was going to be something more than just a high level consolidation. Even that EMA crossover is not an indicator of trend change until we make lower lows on the price. So if one is shorting against the trend, as i said in one of my posts 2 days back, either the DTL or the pivot has to be honored. In this case the pivot is at 1211 and any move above that is a signal to reverse long. If one is a miser on the stops, they could even get out on DTL break on a closing basis or a 3/13 crossover back above. I use pivots to reverse my position though. At the close the 3/13 was in a backkiss configuration on the 30-min charts. Now the big money folks can easily perform a crossover with a gap-up. But will they ?

Bottomline, aggresive traders can go short with the above mentioned precautions, using the preliminary sell. Others can close longs and stay in cash until SPX 1211 is recaptured.

Monday, April 19, 2010

Correction over ?

Odds are about 70% that the correction is over and a slingshot recovery is in progress. One of the cardinal sins of countertrend trading is remaining short when a downtrend line is broken. Yes sometimes, false trendline breaks happen. Those happen once in 3-4 months. If you are betting on such outcome, it's your money We made a divergent bottom on the hourly and broke the DTL. That should be sufficient indication to hop on the long side in a bull trend. Too many are expecting SPX 1225. So odds are we will overshoot it this time. If anything changes in the trend resumption scenario, i will update here.

Sunday, April 18, 2010

The trend is still up....

But the warning shots have been fired. This is the 4th VST sell signal fired by my system since the Feb 2010 bottom. This selloff has been the largest fastest decline since the Feb bottom, which means it is likely that this is more than a one day wonder. If the market were to maintain the current trend structure, then it has to perform a slingshot recovery to the uspide. If it's a slingshot recovery, we should see big volume coming at the open with green candles. Barring that, the slower moving averages on the hourly charts will start curling over, leading to a more deeper selloff. If the volume is anemic on any bounce from here, i will start scaling into shorts between the SPX 1195-1205 area. A move above 1214 is required to invlaidate the sell setup.