Saturday, December 10, 2011

Houston: We have our base

We’ve talked about the 200SMA wall for months — every time the $SPY got close to this major resistance in it did so from an exhausted V-type move.   But not this time.     We hit it again this week and just like always, retraced, but on Friday the market came right back up to base under it — we’re at the cusp of breaking through this coming week.    It hasn’t paid to anticipate now for 5 months and we held off from doing so but we’re on break-out watch mode and have a list of decent candidates as our go-to stocks.
Furthering the bull case is the bar down below the 50SMA for $TLT
On the worry side we’d like miners to act better– but we’d defer to the actual metals ($SI_F and $GC_F) and if they break-out that’s good enough for the bull case.
Copper has broken out of the range and now is basing nicely.  $HG_F
Euro on the other hand is just following the trend-line down — Note however that one good day would break it out of the pattern.
The same can be said for this risk-on metal — silver right now has a bearish pattern but one good day would take it above the trend-line.    Many charts to us look the same — we’re not anticipating but we do understand that they could be on the cusp of a break-out and it’s good to have that possibility  in your trading plan come Monday.
So to recap — we’ve seen this scenario before where things are lining up, bulls are excited and bang bears pull the rug out.   So yes we approach break-out possibility with cynicism but at the same time we do see that this is the first time $SPY has approached the 200 SMA from a decent base which increases the possibility that yes, this time will be different.

Thursday, December 08, 2011

200 SMA wall

We posted this chart yesterday showing the few times we’ve been above the 200sma on the $SPY since the August sell-off.   To be exact we were above it for 2 days on Oct 27-28 before reversing, then one day above on Nov 8 before again reversing,  and yesterday we closed above the 200SMA for the fourth time since the summer sell-off.   If the bulls can manage additional closes above it in the near term ( we’re a point below it  right now) then it likely will shift the sentiment away from  the current “sell-strength” environment.
The most bullish scenario for us is for the market to flat-line and base near the 200SMA and then break through which is exactly what has been missing from previous break-out levels is the base — we’ve approached it every time from exhausted V -moves.     Churn baby churn, indeed.
On the bearish side of the argument,  the 200sma is a wall until it isn’t, the Euro ($6E_F ) acts like death, and silver/gold can’t find any traction.
The recent randomness of news/rumors has diminished the edge for our type of trading strategy and  as we’ve posted on the stream — we’ve pulled back  from being active in this tape.     We’re ok with giving back on trades that simply did not work, but we’re not ok with getting chopped up in a tape that offers no good set-ups for our strategy.        All that being said, things can change in a heartbeat and it’s still important to stay involved and watch price-action, looking for hints of change.