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November 6, 2006

Chagrin Again

On Friday, an RSI divergence on the intraday chart of the S&P 500 prompted me to go long some SPX futures, more as a hedge to all my other short positions than as an attempt to catch a buying spree. However, the attempts at rallies Friday afternoon appeared so feeble, I decided to take a small profit on those contracts and just ride things out.

Obviously, that was a mistake.

Headlines this morning were crediting the new life seen in equities to merger news and lower oil prices. Some headlines still credit lower oil, despite the fact that black gold swung to a better than 1% gain by the end of the day. Obviously, financial journalists can't break their annoying habit of trying to connect whatever stands out in the news with whatever is going on in equities, nor do they bother to check oil prices after 10:00 ET.

Today's buying spree was more likely related to the unwinding of the oversold condition I wisely hedged against and then unwisely dismissed on Friday. Perhaps traders are anticipating economy-saving results from tomorrow's election. Who knows? In any case, we are now in technical limbo. Neither the SPX nor the NDX regained Wednesday's highs (the last big down day), so the next two days will be critical to gauging the near-term market prospects.

Disclosure: None


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