Monday, December 6, 2010

Revisiting RUT

SPX made a HH and HL  and that is positive for the markets.  But it closed in the negative after 3 plus days and thats a negative for spx.  All major hits and rallies have first day before anything major develops.  One of the trading strategy is  to trade in the direction of 1st day's close.  So based on that spx would be shorted today at close because it is first day of decline.  RUT made HH and HL and close higher for the fourth day in a row.  The probability that RUT will be higher tomorrow is 52%. 
SPX made a low at 7 high at 7.30 low at 9 and final high at 3.45.  The range was 5 points very small and it lost 1/2 of it in last 15 minutes.   The high of the day sits by itself as a single point at 1225.8.  It is a mini island formation.  SPX is worth paying close attention to.  RUT had a better range 8 points and rallied all day after making a low at 7.00 am.  It only lost 2 points from th high.  RUT and SPX are totally de coupled.  
The chart on left is TNA hourly.  Its my belief that that TNA will overshoot the top line of the channel perhaps in to Green zone before a decline.  Just a shade below 70.  But the decline will be contained to 64 the median line and a second attempt will be made to pierce the channel.  Well.. lets get there first before I start building castles on a beach.  
The chart on right is RUT daily.  It is above the median line and slowly approaching the top of channel.   It only has 1/3rd the speed of TNA.  It has resistance at the median line at 790 in a few days.  
The chart on the left is weekly RUT and is very important one.  There is only one resistance line that is left from the decline that started at 856 in 2007.  I have marked this in green.  If this resistance is take out there is nothing to hold this rally from bear side.  Future stops will have to generated within the rally itself and they are not as effective. 
The chart on the right RUT monthly.  First the resistance line is like weekly but it is early and it is at 775.  My friend Sylvanus's 88% decline line is at 795.  This 88% has proved to be very effective before and I plan to watch it keenly. 
So bottom line where is RUT.  It is approaching a top but I don't pick tops.  I will wait until one develops fully  and decline starts.  Then I plan on shorting.  For the time being I will do ninja trading in and out on the long side quickly.  
Thanks for reading my blog and offering your support. 

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