Tuesday, August 10, 2010

Off lows but on short term...

... the bullish momentum is in trouble. DMI is still green and the market closed above SMA200 but not before going bellow 1115 in the morning. Feds came to a rescue with their "no change" policy and SPX gained 8 points after that. We are now slightly bellow the uptrend line or, if you prefer, bellow the lower edge of the "rising wedge". SPX can afford to lose another 5-7 points without making DMI turn red but no more than that.

I am surprised people didn't take the opportunity to take more profit of the table today but this may happen tomorrow (as I am writing this article futures are 7.5 points down). We had 6 trading days in a row where market pretty much didn't move despite some significant intra-day moves. This could be interpreted as both bullish or bearish depending on everyone's bias, bearish because bulls seem to be running out of steam, bullish because market still holds despite being overbought on short term and despite some bad economic news. As an option player I did buy some "straddles" (long and short at the same time) since the volatility is shrinking and the options are getting cheaper. Any big move either up or down is going to bring me a profit. For the stock traders I would say take some profit of the table, better lock in some gains. Don't go short yet, it's way too early but if you see DMI turning negative or even worst SPX moving bellow 1100 you can go short.

Long term is slightly bullish keeping in mind that DMI is a little bit green and price is a bit above SMA200. Yet until weekly DMI turns green again bulls should be a little bit cautions.


P.S. Carter Worth, a technical analyst says that market is pretty much neutral and neither bulls nor bears are in control. 

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