Monday, February 25, 2013

Sell signal

A very nasty reversal day for bulls, SPX went up 10 points in the morning to 1,526 just to slip bellow 1,500 by afternoon. EMAs are touching but are not crossing yet. However, SPX moved bellow SMA 120 (1,502) and I am pretty sure that this is the "sell" signal on intermediate time frame. I am going a little bit short today and continue the process tomorrow, after EMAs are most likely to give a bearish crossing.

After hours update

SPX lost another 7 points since my last update. Still no EMAs crossing but I am pretty sure the correction has started today. Reversal days of this magnitude after extended rallies or plunges are pretty good indicators that the trend has changed. 

Bears are happy today, of course, but they need to take into account that we are still in a bull market and corrections are short lived. I won't be surprised to see bulls trying to push SPX above SMA 120 in the next few days. If this happens they are going to be good entries for bears who hesitated today. 

On daily chart DMI has turned negative but remains positive on weekly chart.

It seems that today's plunge found support at SMA 50. Both SMA 50 and SMA 200 are still pointing up.

How deep this correction is going to be? As usually, this is a hard question to answer. What we need to do is to look at obvious support levels and assume one of them is going to hold. I think the best support level this market has is in the 1,400 area where we can find the bull market uptrend line. 

I hope you are going to enjoy the move on the downside as much as you enjoyed the rally from 1,340 until today, or according to EMAs crossing from 1,400 to 1,500. Never be a perma-bull or a perma-bear. Be flexible and you will have a happier investing time.

All the best!


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