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!


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