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August 24, 2009

Moody Monday

I wonder how many traders... particularly those with a strongly bearish bias... are peering at today's reversal candle on the S&P 500 chart with magnifying glasses, thinking they see something bigger than what is really there. Personally, I don't think the action qualifies as a tradable reversal for several reasons.

s&p 500 chart

Throw in $183M of buying-on-weakness on a day that was barely down, and my money will wait for a better setup. That said, a setup may be right in front of our noses.

s&p 500 weekly chart

Many posts ago I stated that a tag of the 75WMA would have me blindly shorting, and the statement still holds true. I do not know if a 9-handle margin is going to qualify as close enough, but I'm going to sit and wait for an actual kiss of the 75WMA to sell ES contracts. However, I may begin by selling a few ES calls since I highly doubt price will get through that moving average on the first weekly attempt. I will say this: if the S&P 500 touches the 75WMA and then proceeds to crash to new bear market lows, I'm going to sit around weeping for a few weeks about how easy the short side could have been with a little more patience!

Gold fell $12 reversed its bear flag breakout, which was surprising given that the dollar was only modestly higher and silver was flat. It's probably just a bit of noise and besides, we have that trend line on the weekly GDX chart to watch for a sign of danger. Gold is also nearing resolution of a triangle:

gold price chart

I'll leave with this thought...

banking index chart

That should get a little debate going.


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