Monday, September 19, 2011

Big gap down, last hour rally on 'Greece deal'-news

Futures went lower overnight and kept losing ground, until an hour into the session. The market tried to put in a bottom, but the bulls couldn't get a rally going. Confidence seemed very low, just as the volume. What first was a victory for the bears changed in the last hour of trading. News came out that Greece would be close to a 'deal'. The market turned into rally mode straightaway. Indices dived into the morning gap, but it managed to hold. Still one small advantage for the bears.
Tech once again was leading the market, Nasdaq did about one percent better than Dow and S&P, but is running into strong resistance.

Hereunder the charts for DIA and QQQ, tech clearly leading!

Gold and silver got beaten up together with equities, just as oil did. And they didn't recover like equities, except maybe oil a little bit.
Another striking loser was copper. Many consider copper being a market leader and a good indicator for the market during the last 2 years. Of course, these things tend to last for only so long and the questions are:
1) When will it stop being an indicator?
2) Is it still reliable at this point?
3) What will the next 'indicator' be?

When indices clearly tried to form a rounded bottom, I went long in SPY, helped by the fact that the big gap down would probably lure some buyers. Entry and exits on the chart below, the trade good for a small gain. I passed on the second bottom (1), due to unconvincing volume. On (2) I started to doubt today could bring us any higher than the open and (3) was such a big candle, I disliked the risk-reward ratio. Missing (2) and (3) are my biggest regrets. But still, better to have small gains than no profit at all or a loss.

SPY 5m-chart:

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