Now What?

In the last two weeks we rallied over 10% off the lows straight into resistance ( see our posts earlier this week Don’t Get Complacent,  Resistance is Futile) where we urged our readers to go short at resistance (the first test of resistance short on extended move is a bread and butter HCPG type short strategy).    Not surprisingly we reversed at resistance but today hit support.  Now what?
Look at where we gapped down to this morning — exactly at support:
$QQQ reversed at 50SMA and gapped down this morning right at gap fill.  We came in with the plan of buying an intraday reversal off of 53.3 but backed away once we got the gap down on the horrendous job report.   We like buying sharp intraday reversals with stops on low — gap downs to our levels usually get us on the sidelines.

$SPY filled gap — and 20SMA right below.  Do or die territory.

$IWM filled gap and opened on 20SMA, again do or die territory.

The leader of the bounce has been the Nasdaq — let’s review

1. Rallied off the bottom all the way back to 50SMA.   Check.

2.  Reversed exactly off 50SMA.  Check.

3.  Held gap fill area at 53.3.  Check.

Now what?   There’s some further support near 53 (20SMA and short-term trend-line from bottom) but that’s about it — through there and we probably revisit the lows.   And if we rally, we have the 50, 100, and 200SMA walls right above.      The lines in the sand could not be more clear.

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Resistance is Futile

Resistance against the first touch of resistance in an extended move up is usually futile, especially if you have a short time-frame.   A bit of a pushed title but always wanted to fit something in from the Borg.   Anyway, we hit and faded from major resistance today on multiple sectors.   This isn’t necessarily bearish but typical price-action in which an extended move hits supply.   Bears would gain upper hand if we reversed hard and fast away from these zones while bulls would win the hand if we can base near resistance and digest the move.    Longer trend we’re still in bear territory but shorter time-frame bulls have been printing better price-action.

We came in with several short spots on the $QQQ (50,100 and 200SMA) and the first one, 55.7,  hit and is currently working   (today’s high 55.74)

$IWM hit resistance and faded:

$XME hit resistance and faded.   Again though this could become a bullish set-up IF we can base under and digest the move.

Disclosure: short QQQ

Update: covered 3/4 on move back below weekly 50SMA, and last partial stop now under break-even at 55.5

Don't get complacent

The leader of the bounce, the $QQQ is now in difficult, uphill waters.  No chart illustrates this better than the weekly:

We bounced on the 100SMA and today stalled into the 50SMA.  Very nice move but we imagine things will slow down now and more range-bound strategies will again come to the fore.

To further the argument note the triple resistance just above us on the daily chart — we think the 55.7-56.4 zone will offer excellent resistance shorts for our type of active trading.

Any basing at this upper range would further strengthen the bull argument.  However, a further move up in a quick manner into major resistance would likely fail.

Usain Bolt DQ at 2011 Finals

Brutal to watch as Usain Bolt gets disqualified from 100 M 2011 World Finals.  Contrary to what the sport announcers are saying though we had to respect how he didn't protest it and took it like a professional.  Mistakes happen.