Here’s When You Know You Are At A Turning Point
Oh, the pundits. They have the magical answer for every market move. Today’s
absolutely horrible close (technically speaking) was commented on with the
following:
“Today was a healthy pullback.”
“With the Fed looking to cut rates, the market is
simply pausing and overreacted to comments from OPEC” J.B.
and my favorite:
“Despite the selloff, the market is in the midst
of a regime change from bear to bull.” B.B.
I almost fell out of my chair when I heard that last one. You know you are at
a turning point when the pundits begin making predictions vs.
reporting/explaining the day’s action. I fondly remember the same bantering
throughout my career, each time it was wrong. Charts do not lie, and a simple
look at them yesterday could have saved each one of these so called experts
valuable oxygen.
The weekly chart has had two instances recently where the week made a higher
high than the previous week, only to close lower. Each time, this was followed
by a period of declining prices. While this week has not been completed, the
daily chart shows an identical pattern, which does not bode well for the market.
Additionally, in talking with a close colleague of mine who is an
institutional broker, he told me the retail phones were ringing off the hook
today.
I mentioned in yesterday’s column that I thought that we were at an
inflection point, as it turns out, I was right. Rather than 893 acting as a
launching pad for higher ground, it actually appeared to be the catalyst to a
truly ugly afternoon. I trust most of you dug in and took advantage on the short
side. But now what? Well, despite the box scores and all the gains that
evaporated, it may just be a pause, but I believe only a very brief one. A
bounce from here is not out of the question.
I consider the levels above critical to short-term direction. 860 is the .38
retracement off the March 12 low and today’s high, while 871 is a .50
retracement off the Dec. 2 high and the March 12 low. Based purely on that, the
market is still strong. However, with April 15 looming as the next Fibonacci
turn date, the action over the next several sessions should give a glimpse of
things to come after April 15. I am bearish after today’s session, but with
several news items still floating regarding Iraq, you cannot rule out further
upside air pockets. In the meantime, trade ’em as you see ’em intra-day. As we
all know, there is no need to get all fancy with forecasts in order to make
money as a trader, but they come in as useful guideposts when the trades are
unfolding. A good example was the 893 level today.
The selling in yesterday afternoon’s session was methodical and relentless,
ideal for HVT and position-oriented trades. I suspect we may get more of this in
the days to come.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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* Indicates a level that is more significant
As always, feel free to send me your comments and questions.
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