Friday, November 05, 2010

Market Talk

SPY has blasted through the 200SMA weekly and doesn't look like it wants to stop anytime soon.  We believe at some point the weekly will be tested again -- the SMA is too important to be taken out so easily in an extended market, but our time-frame as traders is to short for that type of trade.  Also-- even though we see the trade and believe it will work, it's just not our cup of tea.  We're more trend traders than reversion to mean traders.  Even when we buy support its done within a longer term uptrend. 

 As we wrote yesterday our focus today was on the XLF -- its the only sector that was not extended and one we hoped to see continuation from today    We also wrote in our newsletter yesterday that we were looking for further rotation out of technology and into financials -- something which also occurred today.

We have a running alert on QQQQ 55 so we know how far away it is at all times (currently 2.36%).   The 55 number is one of the fundamental reasons we have not shorted swing tech.  Why? 

 Because as we wrote weeks ago -- 55 will serve as magnet.  Why short within a trend that is being drawn to a magnet? 

Weekly on XME looks fantastic -- definitely helped by its gold holdings. 

XME top holdings:

OIH could easily move to the 200 SMA. 

The weakness in tech did not spread to the market as rotation played out and the market ended green.  We'll be looking at this carefully next week to see if tech weakness simply rotates into other sectors or whether contagion will occur.

Very benign tape -- and traders are buying dips ferociously as the "Fed put" and funny money gives confidence to all.   Interesting times indeed.