Luna $ Ticks

November 24, 2008

Evidence Mounts

Filed under: Trading SPX SPY — moontrader @ 7:57 pm

In my last post, after Friday’s rally, I said there was absolutely no evidence of a bottom yet. A 6% rally by itself doesn’t make for a trend reversal: it needs to be followed by other indicators supporting the case. Today we had a couple of bullish indicators. First of all, Friday’s rally sustained and was followed by another strong rally, basically from the beginning to the end of the day. Second, I showed in my Eureka chart that we would have a bottom between Monday and Wednesday this week. Today’s rally obviously put a big question mark on top of the Eureka chart. Let’s not insist on it, since it’s almost invalidated. I say almost because we still have two days in the time window, but today’s rally put us too far from Friday’s low. On the other hand, VIX remains high and, although SPY is not in full bear mode, it’s indeed giving signals that we are still in a downtrend:

spy-112408

The chart above is self-explained, but I do want to call your attention to the close, which was on top of the DMA 3×3. If tomorrow we close below DMA 3×3, we’ll probably see a big drop on Wednesday. It’s worth remembering that today’s volume was low compared to the last two trading days.

I don’t want to clutter this post with a lot of charts, because I don’t want to “justify” the downtrend scenario, so I’m going to show just one more chart:

tnx-1124081

In my view, Treasury Notes yield above 33.54 would increase the odds of a bottom in place. Also, I would take today’s high as the stoploss. And tomorrow close will be extremely important.

Regarding the dates, we obviously can go down next week or another date, but it wouldn’t fit in the Eureka chart. I would have to find other date proportions.

Just one last thing. Today’s rally was based on Citi rescue and Oil spike. Financials and Commodities led the rally. Are financial problems over with Citi rescue? I don’t think so. And Oil remains in a downtrend.

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6 Comments »

  1. Moon,

    Are you suggesting to go short with stop loss at today’s high? Does it mean we are still going down?

    Comment by bullnbear87 — November 24, 2008 @ 8:31 pm | Reply

  2. $CPC too bullish, odd lot short sales ratio returned to neutral from bullish. Tomorrow will see a decline to sell the puts, or just a crash ….

    Comment by not_yet_wipded_out — November 24, 2008 @ 8:36 pm | Reply

  3. Well the market always seem to manage to do the unexpected. This rally seems very similar to the bounce off the Oct 10 2008 low. Mostly short covering. I certainly wouldn’t go long here. However I am still short and gave a lot of profit back today. Question is whether it’s worth covering the shorts at this point after a big rally. As far as spirals go there seem to be several possibilities:

    A) Friday’s low was the one forecast by the spirals – one trading day and three calendar days outside the window.
    B) The spirals are correct and there is a turning point tomorrow, however it’s a top not a bottom – like the Oct 14 spike rally high.
    C) The spirals are correct and we crash back before Thursday and make a bottom – seems unlikely.

    Dave

    Comment by Dave — November 24, 2008 @ 10:28 pm | Reply

  4. Thanks Moon

    Comment by Wanessa — November 25, 2008 @ 4:45 am | Reply

  5. It was a top, not a botton?

    Comment by Wanessa — November 25, 2008 @ 12:31 pm | Reply

  6. Wanessa, we are indeed going to have a bottom, probably not below Friday’s low. And it’s going to happen either Wednesday or Friday. I’m preparing a post with a new chart showing today’s top (the one that happened early today) and fitting Friday’s low into a tight tolerance.

    Comment by moontrader — November 25, 2008 @ 12:36 pm | Reply


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