Luna $ Ticks

December 17, 2008

Ready to Short?

Filed under: Trading SPX SPY — moontrader @ 5:29 pm

In yesterday’s post I said that I was expecting SPX to reach the 1000 level and that I was going to look for relatively reliable new date projections. Today I could finally sit down and go through some charts and date projections, and what I came up with is a cluster pointing to a bottom (at least, some sort of) between the last days of this year and the first ones of January. Actually, many of the dates point exactly to 01/02/09, which is a Friday and the first business day of the year. Going further on this study, I took the previous significant top in the F3, F5 and F7 series and found out that they also produce a cluster which, to my surprise, starts exactly this week, between the 16th and the 19th.

spx-121708-spiral-1

[I draw this chart before the end of the day, and SPX hit a new short-term high at 918.85]

The faint dotted double arrows show the movements in the F3, F5 and F7 series converging to the period between this week and the first days of 2009. Notice how these movements get larger and sharper with time. The next chart places the focus of a spiral on the top of September 2nd, and this focus produced two other tops: a precise F3 on October 14th; and a F5 (3 days error) on November 4th. F7 is exactly today, December 17th, therefore a top happening tomorrow (Thursday) or Friday will be inside the 3 day tolerance.

spx-121708-spiral-2

The next chart shows that – according to the criteria I use (DMA’s, MACD and Stochastics) – there’s no sign yet of a reversal except for a divergence in volume.

spy-121708

For the more aggressive trader, those who like to anticipate indicators to catch the tip of a movement, I would say to check Retracement Levels for potential reversal levels to go short (with the corresponding odds) between tomorrow (Thursday) and Friday. For the moderate/conservative trader, I would suggest waiting for a more clear sign of a short-term reversal. That is, for instance, SPY closing below DMA 25×5 and/or Stochastics giving a sell sign followed by going into negative territory (below the zero line). Stoploss for this trade will be any high above the top formed between the 16th and the 19th.

I already got a small short position and will gradually and carefully increase it as I feel more comfortable and confident, but I’m particularly cautious in this trade. We are at the end of the year and volume tends to decrease, therefore, since the projected date for a bottom is around the first business day of the year, I don’t know how deep or significant it can be.

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12 Comments »

  1. Nice Moontrader. So you don’t think we’ll push up to 1000ish like everyone else?

    Comment by toad37 — December 17, 2008 @ 7:05 pm | Reply

  2. Hey toad, I don’t think we’ll get there in the next couple of days, today’s tape was quite disappointing.

    Comment by moontrader — December 17, 2008 @ 8:30 pm | Reply

  3. The dotted lines show an increase in the drop larger from the previous period. It has 170 points drop in Sep, 200 in Oct and 260 in Nov. Does it mean the up coming drop will be greater than 260 which will mean a new low for the year/ or early 2009? I thought the low was in for the year. I am confused.

    Comment by bullnbear87 — December 17, 2008 @ 8:44 pm | Reply

  4. dow 5000-6000 in 09. go team`

    Comment by BOTD — December 17, 2008 @ 11:12 pm | Reply

  5. Moon,
    Great to have you back……have missed the cerebral nature of your posts…..not to mention you seem to have good insight in the time variable of price/time continuum. I think you called the last low almost to the day. I too have heard of and would like to see retracement to 1000 on the S&P, but ? I just can’t feel it at this point. I think this Friday’s high will be the highest we see for some time on the S&P. Between volume issues and tax selling, next Monday might begin with lots of downward pressure.

    You pointed out today’s high….918.85. That number is very close to the first retracement level on the S&P from top (1570 rough) to the current bottom (740). The number I think is around 919 or so. If the S&P can’t break through that (and what will propel it higher?) there’s only one other way to go.

    Thanks for the wake-up call!

    Comment by RoughMath — December 18, 2008 @ 12:10 am | Reply

  6. HI MOON (trader),

    WELL based on my calculation Dec 12 th should be the lowest in US Equity, but something is wrong, but let see what happens in Jan, But the only thing I can say it is near time to short, don’t know the date of new low bottom or some sort of bottom.

    Comment by cruelife — December 18, 2008 @ 2:43 am | Reply

  7. interesting symmetry map on citdates blog with Dec 22-23 looks like top, 26-29 bottom?

    Comment by Forkoholic Serge — December 18, 2008 @ 10:46 am | Reply

  8. moon:
    Nice to have you back…

    The “SPX hit a new short-term high at 918.8” yesterday count as the high for the period Dec 16-19?
    I wasn’t sure about your parenthetical comment about it happeing after you drew the charts.
    Thanks.

    Comment by DalalStreetKing — December 18, 2008 @ 11:59 am | Reply

  9. Great work Moon! Do you think your next projected low (late Dec-early Jan)would be a pivotal low? Prechter is looking for a EW wave 5 bottom in the near future – maybe this is it.

    Comment by Chrys — December 18, 2008 @ 12:21 pm | Reply

  10. Dalal, not guaranteed. That’s a short-term high but it’s ok if it’s taken out until Friday (tomorrow). It’s important to have in mind that the edge presented in this post will be valid unless a new high happens next week or the following one.

    Chrys, yes, I think it’ll be an important low. Could be the same one Prechter is looking for.

    Comment by moontrader — December 18, 2008 @ 3:12 pm | Reply

  11. Serge, the 29th would be in agreement with my outlook.

    Comment by moontrader — December 18, 2008 @ 3:14 pm | Reply

  12. […] on 12/17/08 in his post “Ready To Short?” predicted a high 12/17/08 followed by a low in the 12/31/08 to 1/5/09 window based on a confluence […]

    Pingback by Turn Lower Likely Monday 1/5/09 — January 3, 2009 @ 11:28 pm | Reply


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