Friday, January 28, 2011

Are we there yet?

Today was the most bearish day in the last two month. We had a lot of bad news, the most important probably being the GDP growth that was bellow expectations. Then we had AMZN and F that plunged after earnings and MSFT in not such a good position either. Not to mention that market was overbought on short term and yesterday bulls were in denial and pushed the market up despite relatively bad news from T and PG.

Has the widely anticipated correction started? Most likely the correction has started but I need to see a bearish EMAs crossing before going "all in". Better safe than sorry. Unless market goes up by a lot on Monday the EMAs are going to cross each other. Ideally, I want to see market moving up a little bit and an EMA crossing at the same time. That will give me a better entry on the short side.

I don't know what is going on with the software today, I am getting a weird chart when plotting on "hourly" (looks like market closed at 1299 which is wrong, of course) so I am using 30 minutes chart instead and doubled all the moving averages, I am looking at EMA 50 crossing EMA 100 and SMA 240. As you can see price moved bellow SMA 240 but EMAs did not cross yet they are as close as ever in the last two months

In terms of support and resistance levels, market failed to find support at short term support levels around 1286 and 1277 (barely missed this one) or at intermediate time frame support around SMA 120 (1282 today). I also noticed that SPX made a lower low on daily chart, it went bellow the previous low at 1281. It's not a dramatic lower low but it's there.

Market never behaves the same but I won't be surprised to see a "dead cat bounce" next week as we saw in April 2010.

SMA 120 could be crossed above and bellow but EMAs are not going to cross up and down at the same rate. That's why I do favor EMAs crossing over SMA 120, because EMA crossing is something that happened once in a while so the chance of a whip-saw is lower than with SMA 120. It's true that SMA 120 gives a better entry when the market violently moves down but most of the time this is not the case.

A flat or a down day on Monday is going to generate a "sell" signal. Keep an eye on that!

Have a nice weekend!


No comments:

Post a Comment

Thank you for your feed-back