Wednesday, April 17, 2013

Some bearishness

Monday was a pretty bearish day with SPX losing over 30 points but there was no continuation since on Tuesday market regained 2/3rd of previous day loses. Yet today was another bearish day letting one wondering what is going to happen next. Are we going to have another fake move on the downside or this time we are going to have the long waited correction? 

EMAs are almost about to give a bearish crossing but we saw that before without seeing market crashing. I must say this time is technically looking just a little bit more bearish than before. Compared to the last few instances when EMAs gave a bearish crossing and price moved bellow SMA120, we have now a pretty flat SMA120. During this rally SMA120 was crossed 3 times, but every time SMA120 was rising. 

I am not going to make a big deal about this, more important I think is to see if market manages to stay above or plunges bellow the support line on weekly chart. Also pay attention to SMA 50 (SMA10 on weekly chart), a level that was not crossed during this 5-months rally. Actually, in the morning, SPX moved bellow SMA 50 but ended the day above this level.

Obviously, there is a 5 months uptrend line that was not crossed during this rally. A move bellow this uptrend line may send a very bearish signal, even more bearish than EMAs crossing. SPX is actually slightly bellow this uptrend line but not enough to consider it significant. If tomorrow is going to be at least as bearish as it was today we may see all these support levels on all time frame charts being conquered. 

The daily chart doesn't give up too many clues, just another support level, somewhere in the 1,547 area.

Gold was hammered this week and has lost now more than 20% since its top around 1,900, meaning that we should expect further move down. I made a little bit on money by shorting GDX (via options) but unfortunately I closed the transaction way too soon. Options are a different kind of "animal" compared to stocks, you can win or lose 20-100% in a matter of days, or sometimes in a matter of hours. I was glad I made a 100% profit in a couple of days. Today the same "put" was valued 10x my initial investment. Wow! 

The key support level on GLD was $152. Once this level was surpassed the gold was in free fall. We are most likely to see fake rebounds but overall gold and silver are going down. At least for a while. 

AAPL suffered another set back today but I don't understand why are people surprised. The stock is in a bear market so moves like this should be expected. I don't venture in guessing where AAPL could stop declining, I am just repeating something I mentioned before, the "head and shoulder" pattern predicts a drop to $360. I mention this because the it was a very clear (text book) head and shoulder.

In conclusion, market remains strong on long term but shows signs of weakness on short and intermediate time frames. We may have an answer about market direction as soon as tomorrow. If this is going to happen I am going to let you know.

All the best!


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