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Wednesday, October 6, 2010

Not another inside day

SPX and RUT both had yet another inside day.   It was to be expected after a big day yesterday.  It is not that uncommon after a 23 point day in SPX.  What is unusual is that spx is putting in so many inside days one after the other. From obscurity inside days have now become very common occurrence and that is bothersome. Currently the optimism is extremely high. Why? All bull ETFs made higher high and bear ETFs made lower lows even when the underlying indices did not.  These ETFs are slowly substituting themselves as pure speculative play.  They are wild in their movement within a day.  Like a chicken and egg it is difficult know if  ETFs move the indices or vice versa.  From the traders perspective they are the greatest inventions since oex index options.  I trade them with care and very short term only. The charts I have are:
The one on left is SPX daily.  The line joining the bottom was drawn first and then a parallel line was created to create the channel.  The blue line is the middle of the channel.  Often time the first hit on a rally comes when the index meets the middle line. After giving enough time for spx to travel to the middle line my mid term projection ( say in couple of months ) is  between 1230 and 1260.  The chart on the right is weekly SPX.  The trend line is one of importance to me.  It is not drawn from 1576 top to 1220 top rather it is drawn from 1220 to the first high that is higher than 1220 on the left and then extended to the right. .  This is first resistance that needs to be broken to signal a change in trend.  The meeting point is near 1198 close to round number 1200. On the monthly chart on the left the trend line drawn in a similar fashion. It also has a meeting place around 1192.  The RUT chart is on the the right (below) and it is a daily chart.  The trend line is resistance and looks like we may have small trouble next couple days.  It also appears we are about to get a golden cross.  If the reverse of death cross happens when we get a golden cross we could get a spectacular rally. I believe all this resistance is about to be pierced soon. There might be some turbulence in the next 4/5 trading days.  Ewers believe we are close to finishing a 2 (1220 to 1010 being 1) and a decline should start very soon.  Whether that decline turn out to be the big 3 is an unknown.  Should the decline be very strong and quick then I will have to re-evaluate otherwise I will continue to be bullish and be guided by my signals on going long and short. 

2 comments:

  1. TZA had twice the volume of TNA today Oct 11. TZA formed a hammer. TNA a shooting star (small). Is this normal volume behavior?

    JXXD

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  2. forget the question. TZA is half the price of TNA. The volumes were not uniform today however vs 3 month average.

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