Monday, May 31, 2010
Eyes wide open
SPX did not show any follow thru. It opened mildly down with a small gap. Spx after the first decline of 8 point made 4 rallies of 6, 8, 7, and 15 points and correspondingly made 4 declines of 10, 13, 8, 11 points. That is 9 chances to good trade. It was an inside day with LH and HL. Meaning the previous day's trend should continue. The thing to watch would be to see if we get a LL or a gap down open on Tuesday to give a change of trend. On the weekly charts we closed higher but we made a LH and LL not very positive.
The chart on the left is SPX weekly. The trend lines A, B, C, D, E join the top at 1576 to successive tops spx made on its rally from 666 to 1220. The way I keep an eye on these to look for SPX to make a top come down and on its way back up, go thru these lines to the upside and give a bullish signal. In the chart it appears like spx finds support at the previous down trendline a couple of times. But these are not support lines and to think of them as such would not be consistent. Lines 1, and 2 are lines joining the lows. I think of those as support and when those are broken I take it to mean the trend is down. Those lines I think offer better points for SPX to bounce up from. RUT is sitting on one those. These apply even to short term there I use the last 2 lows the second has to be higher than the first to give me an upward trending line to form supports and on the tops the second top has to be lower the first top form a downward sloping trend line to form resistance. If the upward sloping line is broken it is short and a if downward sloping line is broken it is a long. That is synopsis of D2PL. Dino's 2 point line. I actually only keep the weekly in the back of my mind, I play mostly on my short term signals of DKOD, DMRM, D2PL and DOMA cross.
The money should have dried up for next week. There is no big news. There is no window dressing. There is no opex. There is no earnings report. I expect the markets to be hit hard because of lack buyers. I am looking to play the short side asap.