Friday, July 13, 2012

Challenge accepted.

Dear BearPig,
  This is how I count the move.  Double zig-zag.  Spy looks worse because of the gaps.  Watch the futures.

Hard to hold from where I recommended going long, but in the green.

Tuesday, July 10, 2012

Trying to stay on the sunny side

A while back I made a conscious decision not to be as vociferous with my opinions on market direction.  I still feel that decision makes sense, but I'm back today whether it be due to pride or boredom.

I think a lot of the negative outlooks on the market are a bit dogmatic while they are definitely based in reality and a somewhat compelling elliott wave count.  Speaking about market signals, the size of the leg down in SPX points was not as severe as what we have seen in previous summer selloffs and the VIX was significantly more subdued.  In short, the fear just wasn't there.  There is a case to say that that leaves plenty of room to the downside, but I lean to the other side of that premise.

I think there is a significant chance of retaking the highs in April, and I think today is a decent spot to trade against a move in that direction.  I could be a bit premature in thinking that we have a bottom here, if I'm early but still correct I could see the bottom in a matter of days.  Anything further than that or significantly deeper would raise doubt to my trade.

We recently had a 20 day/50 day cross in the SPX daily and we fell back into the 50 day as they crossed.  I find that this is typical and this point provides decent support in an uptrend.  Hanging near the 20 week moving average (though under) gives some support.  There are also some significant horizontal resistance zones across the indexes at this level.  The VIX has sold off from its extremes and is bumping up into the 20 day and 20 week moving averages.  The NYMO has worked off a significant amount of its extreme readings.  IYT and IYR are still hanging high having not been affected much during the summer selloff. 

I'm not as concerned with a count here because if we have put in local lows on June 4th, then you could expect a murky start higher.  If there is further correction from April or the start of a larger downtrend, we know the levels where that trade becomes apparent.

There are compelling arguments to both sides of the trade, but having just endured a 4 day move down into significant support I am compelled to go long.

As always, manage your trade.  Know your levels and good luck.