Tuesday, November 16, 2010

It never looks ugly till it gets ugly.

First things first.  Yesterday SPX closed 60 cents from the low and I thought that could be used as low closing and I expected a rally today.  But the study I had done before only looked at closing within 50 cents from the low to project a rally.  That was my bad.  However I wanted to short any way and I did and closed it before the end of day.  Yesterday's inside day did indeed forecast today's decline.   SPX opened with a 3 points gap and never really rallied It went down 22 points from the open to a low of 1173 at 3.20 p.m. and closed 5 points above the low at 1178. It recovered 25% of the loss from yesterday's close.  Bad day all around.  AAPL got clobbered to below 300. Bull ETFs got smashed and bear ETFs flew high.  We are in a decline BUT there will be a rally.  This is options week.  Puts have to be normalized meaning they have to lose value.  If there is a 12 point rally on SPX I plan to short. 
The chart on the left is   FAS the banking index bull ETF.  In the decline from 11/5 it has alreay lost 50% of the rally from 8/25 low.  That is a hit.  Banking and entire financial sector has been lagging for sometime and decline is rapid.  Markets do not rally to new high without the help of banking stocks and they look bad.
The chart on the right TNA hourly.  It is below the median red line (2) that is not a good sign.  I watch this closely.  It is already down nearly 3 steps.  Passing thru the green (5) would be a very good confirmation.  Also the nature of the decline line itself is very different from the previous pull backs.  To me it looks like it wants go down more in a jiffy. 
The chart on the left is SPX hourly.  1157 is roughly 38% decline and it is on the bottom of the channel.  Good place for support.  Notice the accuracy of 77 DOMA giving a  precise point to short at 1207.  On the daily chart 77 doma is around 1135 which is a 50%  pull back point.  All in all this is not adding up to be positive. Since today was a bad day if we get a continued decline then this would be real and may have to wait for indicators to improve to change to bullish stance. I will stay bearish and look for a rally to short.  
Thanks for visiting my blog and giving your support. Thanks

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