This Is The Big Question For The SPX…
Rally, Rally…Sell-off
The market’s ascent in recent weeks is nothing short of impressive, albeit in
a manner in which I have ever traded. Despite being in this business for nearly
10 years, I have not seen a rally which is so tepid, from a trading standpoint.Â
Perhaps this is how markets trade after a three year clock cleaning, I simply do
not know. Position wise it has been good, trading continues to be an exercise
in patience or better phrased an opportunity to extend your time frame a bit in
order to ride out the trend which is accompanied by significant “noise”
intra-day.
Yesterday’s action was best played from a slightly longer time frame,
although I will be the first to admit I did not, on the long side at least.Â
There were several time where you could have re-established or added to longs
based purely on the 5-minute charts of the S&P’s and in particular the
banking/brokerage sector.
I will say that trying to fade yesterday’s gap was not possible. When the
market opened it seemed like a logical thing to do:
1. Most stocks and the futures opened well outside their upper Bollinger
Band.
2. The S&P’s traded right into resistance at 970.
These two pieces alone were a great recipe, unfortunately there was just not
enough selling pressure to make the trade play out. Goldman Sachs had big bids,
nearly 300 contracts, when the S&P’s came within the 970 level. Eventually
everyone got the picture, even Merrill Lynch joined the party, if you ignored
it, you got leveled.
The best trade, which I did take and called out in the Trading Room was a
short in Wal Mart (WMT).Â
WMT had been a laggard all day, and simply
using the same technical set-up that we would on HVT,
I simply looked at the WMT 5-minute chart
and knew that if the S&P’s were to break the 970 level I would be in good
shape. I did not expect the sell-off to be so deep, but I was not complaining.
It reinforces the idea of being flexible without throwing out perfectly good
strategies. By reducing share size and extending time frame, I was able to take
advantage of a good set-up.
Longer term, the monthly S&P cash is beginning to send a clear signal. The
chart below shows that the neckline has been breached, the big question now is
will it close the month above it in order for a true technical hurdle to have
been cleared?
I did not have enough time to complete my thoughts on
the dollar as I had said. I suspect that Wednesday’s column will contain my
thoughts.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
||||||||||||||||
|
As always, feel free to send me your comments and
questions.
Dave