Thursday, May 27, 2010

Power of Window Dressing

This market is on such a heavy dose of vitamins that even the best in the business get very shaky from time to time.  After a class  A reversal yesterday one would have thought SPX  would show a little continuation.  Nope.  We got yet another reversal and shot up over 200 points on dow and 28 points SPX to move to 1095 by 7.30.  Market stayed like that for the rest of the day and shot up another 8 points to close at 1103.  From my previous study I know this kind of gap up move is not good.  Also 1103 is 3 points above the round number.  When SPX closes slightly above the round number that is negative and slightly below is positive.  SPX did make a HH and HL which is positive. Two days in a row now.  
The first chart is that of TNA.  I put this up because I noticed that 103 DOMA is resistance.  This would be a third attempt.  It is at 51.50  That may not be a bad spot to short with tight stop.  Also I was blown away that the rally took TNA from 39 to 49 and may be 51 tomorrow.  That is 12 points on 39 and that is 31% and it is a lot of money.
The second chart is FAS 30 min envelope doma 77 and deviation of 9% on either side.  After entering the channel on Tuesday FAS is alomost at the top end of the envelope.  I will wait for it get out of the channel and then get back in at the top to short.
When markets open up or down with a gap, it is best to stay away and wait for a better appropriate time to play.  The only observation I found useful at around 7 - 7.30 am there is pull back and if I feel risky I jump in for some change..
Markets only move by massive amounts when money chases stocks.  Pure demand and supply.  Money managers had to readjust their portfolios for the end of the month.  I would infer they sold yesterday and bought today.  With three day weekend coming up I would never take a position home.  I might play the short side if DMRM says so again for some change. 

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