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Wednesday, February 16, 2011

Today is the day!

RUT made  a LH and LL and closed in the negative and the range was pathetic 6 points.  SPX also made a LH and LL and closed in the negative and a even more pathetic range of 6 points on 1325 points.  Since the start of this year only twice has the RUT been able to put on more than one day declines.  Once it was 2 days and the other time it was four days.  Other times the declines have been limited to just one day.  That makes it difficult to trade.  The better strategy may be to buy and hold.  
This OPEX week.  In this week there will be one day when the markets will come down strong may have happened today but I am not convinced;  and another day when it will be up strongly.  That I know hasn't happened yet.  The floor covers its calls and writes some expensive puts on a down day and covers the puts on an up day.   This tells me we should have a good to very good up day very shortly either Wed. or Thurs.  Generally on Fri. every one is in their best behavior.  Markets on that day are flat as a pancake so as not to attract any attention.
From my last blog I am expecting tomorrow to be a topping day and hence a good size rally has high probability. 
This is a daily chart of RUT.  It is not very far off from all time high at 856.39.  It is on the median line of the top half of the channel usually not a strong resistance.  The top line of the channel is at 890 or so.  Now once we blow thru the old high RUT should decline a bit (In the words of my guru Adi its called saluting an old high) and then really. It then wont be a declining market at all.  So things are getting little interesting and I plan on watching.

This is also RUT daily.  It has Gann angles on it.  I have marked lots of lows and highs on it.  First thing I noticed was Lows and Higher Lows followed by Highs and Higher Highs.  During last years decline I did see LH and LL.  IMO it is important to keep a chart with numbers on it.  It helps me identify the trend very clearly instead of getting lost in trend lines looking for tops.  The 3x2 is quite good in offering resistance it is at 836.  
This is by far the most important display I follow.  I found charts with lots of lines can inundate me with too much information.  A carefully constructed matrix helps me a lot.  I start with Column D as low  then C as high. Col B = Prev. row D - C  and Col E = C - D. For  decline as a % of  rally Col. F = E/B and Rally as a percent of last decline Col. A = B/ Prev. E.   When the percentage get very high orange cells I know trouble is brewing and RUT is ripe for a turn.  

I am bullish for tomorrow and will act as soon as I get a signal.
Thanks for reading my blog.

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