Sunday, March 24, 2013

Slightly down

SPX closed slightly down this week but the bullish momentum remains unchallenged.

Bears could probably argue that market is making lower highs and lower lows on daily chart and that daily DMI is just a little bit positive but the action remains bullish. Bears pushed market down a few times this week but bulls recovered nicely.

On intermediate time frame SPX remains bullish, the two hour chart shows a bullish EMAs crossing and SPX above rising SMA 120.

Cyprus crisis is not over yet but it doesn't seem to affect the US market too much which is bad news for bears. In general just a rumor of a crisis pushes SPX down, but it doesn't seem to happen this time. SPX remains just slightly bellow all time highs around 1,565.

It is possible that market refuses to correct because the Cyprus crisis may end soon (as soon as Monday). If Cyprus fails to negotiate an agreement with the Euro zone lenders we are probably going to see market moving down but it remains unclear how much the US investors are scared about this. The well anticipated correction may still refuse to occur despite Cyprus.

All the best!


Friday, March 8, 2013

Bulls claim the week

It's never funny to lose money but this is exactly what happened this week. After a "sell" signal that looked pretty convincing bears couldn't not move SPX further down allowing bulls to re-claim the trend. 

The whip-saw was pretty bad because I waited for bulls to close above the most recent high (1,530) to cover my shorts. The new "buy" signal was actually not that bad, around 1,515 for a 20 points whip-saw but I didn't believe it and waited for a few more days. 

This is not the first and certainly not the last whip-saw I am going to encounter. Now I need to move on  and reinvest on the long side. It's easier saying this than doing it since after such a whip-saw and market advancing 200 points since the last bottom I am not that confident that the rally will continue. According to TA the rally is going to continue but at the emotional level I find it hard to accept this fact. Emotions are always bad when playing the stock market but what can we do, they are part of us and we cannot get rid of them just by snapping the fingers. Last time something similar happened, in 2010, I hardly had the courage to re-invest on the long side and lost a big chunk of the new rally. Eventually market corrected bellow the level I exited but on short term that was a lost opportunity. 

What is curious about this rally is that the dollar also rallied since the beginning of February. A strong dollar is usually bad for the market but exactly the opposite happened this time.

In conclusion, I am out of the market right now but not long yet despite the fact that all the charts are screaming bullishness. I may go long a little bit but most likely I am going to be a spectator for a while and re-invest on the long side after a real correction.

All the best!


Wednesday, March 6, 2013

Nasty whip-saw

What I was afraid it did happen, SPX closed above the previous high, 1,530. It looks like we have a whip-saw here, "sell" signal followed immediately buy a real "buy" signal. I don't think bears will turn the market in their favor from here since everything seems to go in bulls' favor, positive weekly and daily DMI, higher highs on both daily and weekly charts. 

Time to give back some gains. As for changing the pair of EMAs here... I don't know. This is the second time in five years when EMAs failed me this way. I've got other whip-saws before but in the end it turned out that the initial signal was for real. 

I have three options here regarding the time frame I am trading, I can leave thing as they are, I can go to hourly chart or alternatively to 4 hours chart. The 4 hours chart looks tempting in the current market conditions since it gets rid of all the whip-saws I had in the past but the "buy" and "sell" signal will come slower than on 2 hours chart which will make harder to make money especially on the short side. 

It's not impossible to see SPX moving down from here (there is no such thing as "impossible" in stock market) but you know me, I am trying to play "the highest probability game" and the highest probability is that market is going to go up from here. In bears' defense I haven't noticed, neither yesterday nor today, a huge volume which questions a little bit the new highs seen especially those in Dow. SPX is still 25 points shy of the "all times high". 

I'll be back on Friday with more details.

All the best!


Friday, March 1, 2013

Another flat week

SPX didn't move too much overall but the week was extremely exciting. After a huge drop on Monday, that onset the "sell" signal, bulls recovered the lost ground and managed to finish the week 2 points above last Friday's close. This is the 4th week in a row with SPX finishing more or less at the same level but the last one was the choppiest of all. 

This morning bears pushed SPX to the level were the "sell" signal was generated but once again bulls managed to recover nicely.  I had a thought, for a split second, to cover my shorts but I resisted knowing that most likely market is going to go down for good relatively soon. I've seen this move before and I know that once the sell signal is generated market is going down no matter a few bullish days in between. As I mentioned last time, only once in the last 4 years I've got a "sell" signal and market moved up a couple of weeks later and advanced another 100 points until the next correction arrived. 

The bad news for the bears is that SPX found support in the morning exactly at the rising SMA 120. Also I noticed a small bullish EMAs crossing but again, this happened before so I am not really concerned. I will freak out if I see SPX closing above the previous high (1,530) but until then we are still OK. 

Daily chart shows SPX making a new high, but not too convincing, just  2-3 points above. Daily DMI is neutral at the moment. 

All the best!