Luna $ Ticks

October 15, 2008

First Signs of Reversal

Filed under: Trading SPX SPY — moontrader @ 8:52 am

First of all, I’m awfully sorry for the last two days. I’m fine, my family is fine, everybody is in good health and happy. I just had an incredible problem with a internet connection. I’m setting up a small office in a company like Regus – they rent small spaces and provide an infrastructure at an extra cost – and this company here provided me with a dial-up speed connection (nominal 128Kbps, but 25% guaranteed, meaning 30Kbps, which was what I got most of the time) at a cost of almost 100 US$ a month. I couldn’t even load my WordPress page. Forget about writing a new post or uploading charts (which are png, very small). The connection would interrupt every five minutes and ThinkorSwim wouldn’t initialize. Can you imagine my frustration in the last two days? Finally, I got a cell phone modem which, to my surprise, gives me a 1Mbps connection and stable! The cost is 40US$. Ok, now I’m happy again.

Let’s go to the charts. The first one is something I forgot to show in the last week. Dow Financials finally went to hell, i.e. below July low, where it belongs. But there’s something curious about it:

The curious thing: it’s back above July low! This might be a direct consequence of capital injection in the sector. Next thing: SPY.

Here you can see the first signs of a trend reversal: yesterday it closed above DMA 3×3 plus Stochastics turned positive. However, MACD is still negative. Stochastics is a fast indicator and shows what is going on in the short term. It’s also good to anticipate sharp movements when the market is trading sideways, which is absolutely not the case. You can also see in the above chart that SPY retraced 50% to the penny if you consider the 09/19 top and last Friday’s bottom. Just notice that we are still very far from DMA 7×5 and 25×5. The last chart is VIX:

Here another interesting thing: after peaking last Friday, VIX dropped below the 1998 (60.63) and 2001 (57.31) peaks, plus it came back below DMA 3×3. However, notice that it kissed DMA 7×5 and today it’s trading between the 60.63 and 57.31 tops. MACD is still up, Stochastics is giving a sell sign.

Conclusion: Although we can see the first signs of a reversal, we might still see new lows before the end of the month. There’s a good chance we’ll go up until Thursday or Friday, after which we’ll go back down, close to Friday’s bottom if not below. But that has to happen before the end of the month. Otherwise, we’ll be talking about a bottom in place for the medium term.

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2 Comments »

  1. On Sunday, when I looked through my charts all I saw were buy signals. I had to dig for sells. Last night, all I saw were sell signals, had to dig for buy. My original thought was that we would rally to near 10k DOW, not on this move, but by mid Nov. and then have another big drop. However, after Monday, things are skewed. I would not be surprised to see us test the lows of last week on this current down move.

    Comment by akoptiontrader — October 15, 2008 @ 10:22 am | Reply

  2. Moon,
    I am so happy you all fine.

    Comment by David YZ — October 15, 2008 @ 1:18 pm | Reply


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