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Tuesday, November 13, 2012

Daily update 11/13

The bulls sure are not very ambitious.  The market rallied from a gap down at my support line again, but fizzled mid day.  Here is the daily SPX chart.

SPX made a new closing low for this move down and below the low of the 11/8 bar.  That was the blue bar that was the first close below the 200 SMA.  With a close below that low we should have confirmation of the break down.  I mentioned last night that I thought there were a lot of people looking for a bounce and it might not happen.  Lets zoom in to the 60 minute SPY chart.

I put on a swing short this afternoon.  Here is the logic for the trade.  We had a nice double bottom off the last support line on my chart.  We closed above the 18 SMA.  At this point I was thinking maybe we finally would get the bounce I was hoping for.  However, after messing around for a few hours it went nowhere.  I have noticed that during really fast moves the price rarely gets back to the 50 SMA.  However, it always gets to the 18 SMA at some point.  Had we had another hourly close above the high of the bar that closed above the 18 SMA, I would have been looking to be long for the bounce.  However, when the rally failed and started heading down again I put the short on with a tight stop above the morning high.  SPY had to close back below the 18 SMA before I would hold the trade overnight.  Lets zoom in to the 30 min. chart.

As the market started to sell off in the afternoon the volume picked up. There was a little bit of conviction going into the close so I held the trade overnight.  Price is now between the support line and the hourly 18 SMA.  One of those lines will break.  If it is the 18 SMA I will reverse and go long off the triple bottom on my support line.  If we break down below the support line I will add short exposure.

While most people in the market today seem to be afraid to be short, I think people should be afraid to be long.  I look at the day after the election as a break away gap to the downside as I noted in the daily update. Those can kick off very powerful moves.  I do not want to be sitting on the sidelines watching it tank without me.  Maybe tomorrow will be the day the market will decide whether to break down here or bounce.  I don't think they will be buying a gap down tomorrow based on the look of this 30 minute chart.  A gap up is a little harder to predict.  They might sell into a small gap.  At any rate I will be watching the hourly 18 SMA on the upside.


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