Wednesday, November 16, 2011

Scum and Reversal

 Three charts we’re watching closely for bullish confirmations are $GDXJ $MOS $GS.  What do they all have in common?  Possible break-down failures which would be bullish.  Scum and reversal (go through the breakdown zone and then reverse higher) trap the bears and inspire the bulls.    We need the closing price to make any kind of price-action judgement but keep these 3 on radar:

We wrote earlier today that $MOS was offering decent risk reward on 55 break-down reversal (was around 55.4 at the time) with stop at 55.     A close near 56 would be bullish.
$GS 98 we posted last night we would be short but that a scum/reversal would make us bullish.   The short worked for a point and now it’s hovering under 98.   A close over 98 today or tomorrow could help bottom this financial.    It trades heavy today (too heavy for us to go long) but keep on radar.
We posted this last night as action spot — look how it scummed the lower trend-line and then reversed to stall at higher trend-line.    A move through the upper trend-line could get $GDXJ going and would be nice win for the bulls.
To inspire the bulls you need the closing price to have some distance away from the break-down zone.  A close near the break-down point would not really yield any information/edge.  Two hours to go until the close –  keep these 3 on your radar when doing research tonight.

Not good enough risk/reward

We sent this off to our subscribers (in the newsletter) after the close today:

Usually we’d be in anticipation swing mode right now — that is, putting on positions that we think will hit tomorrow.   We held off as we didn’t like the risk/reward as we found good arguments for both sides.
For the bears: 

1. We don’t have enough set-ups we love — it really is still slim pickings.  However, once we break through the range this will change fast.
2.  The volume is atrocious.  Note how the Euro  ($6E_F) is doing nothing (i.e. not confirming today’s rally) — and currency traders (also bond and commodity) tend to be more “right” than equity traders.     Equity traders running up the market on no volume for a Thanksgiving rally.
3.  One of our favorite “tells” , the Ags ($POT $MOS $AGU) , are doing nothing and look terrible.  
4. The “solution” to the Euro mess will likely involve money printing so why are gold/silver stalling?
For the bulls:
1.  The resilience of this market is astounding.   No matter how bad the news, and yields surging in France this morning was pretty dismal, the bulls buy the dips.     This is a huge point.
You take all these arguments together and what happens is it puts us on the side-lines.    The risk of a break-out head-fake we believe is too high for us to anticipate anything right now.    There will be easier markets to trade and this certainly isn’t one of them.

Sunday, November 13, 2011

Bulls need to prove it this week

This week should be pivotal — we’re right against resistance in many sectors and it’s up to the bulls to take the ball.
$XLF through this down-trend could cause a squeeze (that being said the first attempt on it could be a nice opportunity day-trade short –all about time-frame) .
$SPY going back to the top of the handle — needs to get rocking if it wants to get the juices going for a year-end rally.  Thus far every attempt has been squashed –  again, up to the bulls to prove different.
$XME lagging — still under the range.

Copper $HG_F  still the weak link even though no one seems to care about it anymore.  Needs to get going above that trend-line and 50SMA to get the bulls excited.
Best looking in the commodity region is the $OIH — right at resistance, looks like it wants to be the first to break-out.

Should be week full of opportunities, be it failed break-outs (resistance shorts) or finally some continued bull follow-through.   Buckle-Up.