Home > News & Commentary > Short Term Trouble, Long Term Gift? (SPY, SSO, SDS, SH, /ES)

Short Term Trouble, Long Term Gift? (SPY, SSO, SDS, SH, /ES)

Sorry about the lack of recent posts, I’ve been pretty focused on the markets lately.

Last week the bears broke some technical setups where the bulls had a big upper hand. I started to sell positions at that point and increased my selling this week as the charts got uglier. Thursday was absolutely short covering. Looking at the up/down volume and advance/decline ratio’s from Wednesday to Friday, you can see an almost symmetrical reversal that means the market was overwhelmingly short, covered and put the shorts back on. This current short setup has a target of $1023.90 on the /ES (E-Mini S&P500 Futures). Let’s take a look at some charts:

KillZoneLong

You can see here that we bounced off of our long term downtrend line and today we closed below our nearer term support uptrend. I’d like to hope that if we close above it things will be fine but I think that is unrealistic. It’s hard to imagine why the market should be much higher than 1200 considering the long term structural issues that the U.S. is still facing. Even if the dollar continues to fall, we are net importers; so while international corporations may get revenues in stronger currencies, they still have to pay to much for input costs. a weaker dollar would be nice if we were still a manufacturing based economy but we aren’t. Next Chart.

HeadShoulders

You can see on this chart that the most recent surge took place on higher volume. However, the volume faded on the way up and picked up steam on the way down which is not a good sign if you’re a fan of Dow Theory. The good news is we have a long term inverted head and shoulder pattern (I admit I have seen better ones) which could give us support around $970.

SupportShort

I normally wouldn’t have given much weight to the H&S pattern (green line of support) but it also coincides with what should be a strong 50% fib retracement at 985. It is also an area where the shorts will be taking profits at their targets.

I will be in a conservative bear mode (and short through SH or SDS if the market somehow manages to rally back above 1065) until we get down below 990 where I will begin going long again. I will also consider a small long position through SSO around 1018-1020 where there is another decent long set-up.

Get your shopping lists ready everyone!

-MJB

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  1. November 1, 2009 at 5:00 AM

    Really good account of the last week. I cant say Ive taken the time to understand the charts but you dont need them to tell you were in a bull market and wont hit 14000 for years probably.

    -commerical real estate market bottoms out soon
    -not to mention the political push for regulation comin
    -massive growth in consumer savings
    -and the funds rate at zero?!

    Your the expert.

  1. November 19, 2009 at 4:55 PM
  2. December 9, 2009 at 7:46 PM
  3. December 9, 2009 at 7:54 PM

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