Luna $ Ticks

August 18, 2008

Caution and an Open Mind

Filed under: Trading SPX SPY — moontrader @ 3:50 pm

Although market action today might have jeopardized my outlook of SPX 1325 by tomorrow, August 19th, there’s a couple of aspects that still support it.

The first one is that today we had the lowest volume in SPY since May 30th. SPY also closed well off lows, heading up, above the 61.8% Fib retracement level (red), and above the support trend line (black):

Notice also that the fact that SPY reacted as it touched the red Fib retracement level of 61.8% shows that the top and bottom I’m using are the right ones. Being so, they can also project possible targets in case we have new lows for the year.

The following chart – exactly the same as above, but I replaced volume and drawn elements with my favorite set of studies – has also some aspects to be taken into consideration:

SPY touched the Daily DMA 7×5 (green line) and bounced back up. MACD Delta is still positive – although declining – and in positive territory. Stochastics, however, has a sell signal given a couple of days ago, but still in positive territory as well.

I wouldn’t bet all my chips in it, but a rally might be in the oven for tomorrow. I already have some far out-the-money puts for a big breakout to the downside, but at this point I’m exercising caution while trying to keep my mind open: I hedged my position last Friday getting a couple ATM calls as well.

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6 Comments »

  1. If we dont go up tomorrow will you be convinced we are heading for the lows of the year then?

    Comment by Jigsaw — August 18, 2008 @ 5:46 pm | Reply

  2. We need first to see what will happen tomorrow. If the market opens around today’s close or even with a gap up, I’ll try a little day-trade on the bull side. However, if we have a gap down, I’ll sit on my hands until I have a better picture of what’s going on. One thing is for sure: we don’t have a break out yet.

    Comment by moontrader — August 18, 2008 @ 6:09 pm | Reply

  3. Fwiw, your fibs are upside down (start point – in your charts the highs – should be 100, not 0). Also, your 2nd set should really begin at the May high – makes no sense using the lower high in June.

    Both points are intended as CONSTRUCTIVE, not nitpicking. Good luck! :)

    Comment by aqua — August 22, 2008 @ 12:03 pm | Reply

  4. Hey Aqua,

    That’s the whole point of using different tops: you have to find out where they converge, trying different tops.

    Comment by moontrader — August 22, 2008 @ 12:09 pm | Reply

  5. use the SIGNIFICANT tops/bottoms, not interim. You can make ANYTHING converge if you customize it in order to make it do so, but that’s not how Fibs are intended. Many have played w/ Fibs and fallen into that trap, only to move on to the next technique because it doesn’t seem to ‘work for them.’

    I’ll let it go now. :)

    Comment by aqua — August 22, 2008 @ 12:25 pm | Reply

  6. Ok, everybody has a different approach, all of them valid as far as you’re making money.

    Comment by moontrader — August 22, 2008 @ 12:32 pm | Reply


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