Thursday, November 19, 2009

Stocks Head Lower



As all of you know, I have been bearish on the stock market since last week and today I added to some of my short positions. For now lets just focus on the S&P but in my next post I'll write about some of the groups I like on the short side.

Above is a daily chart of the S&P and as you can see the top of the channel appears to have halted this month's rally. Today stocks were down on an increase in volume which I consider to be bearish and helps confirm my bearish outlook on the stock market.

One thing I've learned about the market is that it can be very symmetrical in both price and time. If you look at the last 3 rallies, you will see that the price magnitude of all 3 rallies is roughly 80 points (ex:1020-1100). In addition to that we also see that all 3 rallies lasted about 12 trading days (measured from low to highest close). Having said that, I feel that the upside objectitves have been met and that a downmove in the market is about to take place. My downside objective for the S&P is a retest of the November lows. Keep in mind I am not shorting the S&P, I am short the groups that are showing relative weakness. I'll talk more about these groups a little later.

4 comments:

ben said...

e-mini (S&P futures) also show
an island reversal on the 60
minutes chart, but the stochastic
is approaching oversold condition.
There is a volume spike on
up tick at the end of today,
which I am not sure what it means.
Where do you think the S&P will
find support (you mention 1040).
The conventional next support is
1060. Tomorrow is expiration date
so the direction of the market
will be manipulated and not
significant.

SJG said...

Kevin,
Although my indicators agree with you about the market heading lower, I'm looking at the consolidation of the dollar (I look at the EUR/USD) over the last 9 days. I could very well break to the up side and pressure stocks and commodities upward. What do you think?

SJG

Kevin said...

Anything is possible that's why I always trade with protective stops.

getyourselfconnected said...

I think the new year will bring QE 2.0 and MBS buys on steroids, so the melt up should be intact into 2010 as the dollar trends down. Withdraw that crutch, and, well, there is a monster gap down for most any asset out there. Guess which way the government will trend?

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