Wednesday, November 23, 2011

More downside

The session opened with a big gap down and kept dropping the first hour. A few minor bounces and lots of choppy action followed. S&P-futures revisited the low of the day in the afternoon. In the last hour a spike up was sold just as fast (more chop). The bulls tried a second big move in the last half hour, but that one also hit resistance (1170 for S&P-futures / 117.60 for SPY) and reversed. The last five minutes saw a violent sell-off, bringing us to new lows for the day! Very bearish and all this on average volume.

No real panic yet though, and the VIX is proof of that imho. It's not making new highs in the last couple of weeks, while indices are going much lower in the last few days.  Not exactly sure how this divergence will work out. Will we see a panic sell Friday or next week?

You can find the 5m-chart SPY in the trades-section.

Daily charts DIA, QQQ and SMH:

Indices are down for the sixth consecutive day and lost about 7.5% since 11/15/11. The breakdown of the triangles formed on the daily charts, were definitely successful. The question now is, when and where will we find support, because the market is getting oversold. Of course these oversold conditions can last longer than we might expect/anticipate. So patience is key and best to be very cautious with long positions. Keep them small (and stops tight) or even better, wait for a decent bounce/upday.

Silver is very volatile lately, often 2-3% moves. And today was no different, down over 3%. Gold ended just under breakeven. Metals bounced better intraday than stocks did and seem to be bottoming (especially gold). But wait for confirmation (a strong upday with lots of volume) before going long.
Oil still consolidating after a small pullback, needs to hold 95.
The euro dropped over 1% and seemed to pull the market down most of the day.

One thing is for sure, I overtraded today. Always very small positions, but too much trades. Missing the better trades and being involved in choppy action, made me often exit at breakeven. Looking for a bottom often requires several attempts. It took me four SPY-trades and the result was a $5 (yes, five!) 'loss' for the day... Entries and exits on the chart depicted below.
I tried longs because the market seems to be too oversold for shorts. But we're definitely not ready yet to go higher!
1st trade: long SPY @117.19, out 117.23
2nd trade: long SPY @117.02, out 116.90
3rd trade long SPY @117.02, out 1/4 @117.27, 3/4 @117.03
4th trade: long SPY @116.84, out 116.87

I also tried a small TNA-trade, on a (failed) breakout, long 35.84, out 35.58.

5m-chart SPY:

Have a happy Thanksgiving!!

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