Monday, November 15, 2010

Sell signal

I sold everything today cashing a nice 120 points profit on SPX. EMAs did cross and price is now slightly bellow rising 5 days SMA. There is a 5-6 days downtrend line that acts as resistance, another bearish sign. SPX may have another attempt to climb above this line before going down.

I am not going short yet since I am not 100% convinced the intermediate trend has turned south for good. Daily DMI is still positive for SPX and hourly EMAs are barely descending, a sign that some bulls are still hopeful. If tomorrow I see market continuing to go down I am probably going to jump on some short ETFs, SDS, QID or the relatively new guy in town, SQQQQ, a 3x Nasdaq short ETF. I don't like FAS-FAZ pair and any Direxion ETFs as a matter of fact, except, maybe TNA-TZA.

You must understand that EMA25-EMA50 pair on hourly chart is not a magic pair, it had a very good degree of accuracy lately but you can get whip-saw here and there. Last year, from November to December, it was a terrible time for me, market traded in a tight range (1090-1115) and I've got whip-saw 3-4 times before I decided to stay away from the market until I saw a big jump above the resistance line. Please notice this is a daily chart so don't pay attention to EMAs. Bellow I posted a 4 hours chart. There you can look at EMAs crossing (adjusted to 6 vs. 12) and 5 days SMA (adjusted to 30). Sorry for the confusion.

As a confirmation of the potential downtrend we should keep an eye on daily DMI that is slightly positive for SPX but is practical neutral for DOW and Nasdaq.

A 10 points drop on SPX tomorrow is going to convince me to go short.

All the best!


P.S. Many thanks to those of you that clicked on my adds or bought anything from Amazon through this blog

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