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December 9, 2008

Phantom Short

We got a close below SPX 898... not the greatest news in the world since that level was an important breakout point, but I think there are enough positives such that we don't need to panic. Yesterday's low held. Today's drop came on declining volume. And SPY saw significant buying into weakness as mentioned by Gary in this evening's e-mail. Yesterday I speculated that the market would see some serious upside "within a couple of days." I am taking the liberty of resetting the count and repeating that we will see serious upside within a couple of days. I also mentioned yesterday that I would not be surprised if we saw a huge rally today. I am going to slightly alter that expectation such that I would be surprised if we did not see that rally tomorrow.

Let's allow some chart to speak:

index chart

dollar chart

indicator chart

I suspect the first surge of this mid-term rally will be strong enough to push the NYUD above its typical band, and this indicator may help us prepare for the first significant consolidation of the move.

indicator chart

By now you must be wondering what all this has to do with the title of the post. Well, nothing. A phantom short is just one of my pet terms for trading activities. Whereas shorting involves taking a negative position, a phantom short involves temporarily closing a long in order to take advantage of an anticipated price drop. The "phantom" comes from there being no actual position during the trade. It's all relative, you see.

Example:

index chart

Nice, eh?

 

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