Monday, November 15, 2010

Market analysis, QE2 and Pabst Blue Ribbon

Markets keep going up for (insert favorite reason here) as a general trend.  No trend, no matter how strong continues indefinitely without pauses, failures to correction etc.  We have not had a decent failure since back in August and are certainly due to correct a bit.  We paused with sideways moves in September, October and November with a burst of energy around the mid-term elections.  It’s hard for me to see what anyone would get excited about in an election which only promises (a.) more of the same or (b.) more of the same but with different idiots.  Nonetheless, it did produce the burst of excitement along with the let down which may and should give us a nice little correction.  It has been obvious that markets go down much faster than they recover and go up.  With this volatility this could be over quickly just as well as a nice correction futures traders can exploit to their advantage as long as your bias ( I always say traders should have no bias  ) remains correct in this counter trend move. 


I have been a bit absent from the pages and writing TA stuff lately but that does not mean I have not been actively paying attention and trading.  Just not enough time to share too much here.  I have been resurrecting a bunch of equipment I have setting around and trying to get lean here at the house.  Plus my truck (a bad-assed Ford Lightning) has been feeling neglected so I just pulled all the wheel assemblies down to the spindles and replaced all bearings, rotors, brake pads and various other little rubber thingy’s that wear out and could put me out of service in the event of lean times. So, enough of the excuses, back to the market.

I have two good  sell signals on the daily and one getting ready to be two on the weekly ES.  (I using the S&P  as that’s what I trade (ES mini futures)as opposed to the  or YM/DOW, It’s all the same anyhow just transpose the thought process to whatever.)  I have one FIB just eyeballed in which I have been using as a target for this up move at 1228.74 on the S&P.  We hit 1227.08 on the last weekly green candle close so close enough for government work on a pretty long timeframe.  It could come back and pop suddenly to hit the 1228 who knows but for now all I see is down for a bit.  How far?  Well, I’m thinking one step at a time so first we need to break the daily 20 SMA.  Friday saw us hit dead on the 20 SMA and bounce with a close slightly above at 1199.21.  Today (Monday) did not produce and serious follow through for an all out failure and the low was 1197.15 3 points above the 20 SMA so no failure yet.  I would look for a slight bounce and a second test of the 20.  This would be right in line with FW’s well know MAP pattern.  The second test will be time to fish or cut bait.  Should we fail the 20 on a daily close then my target will be the 50 SMA in the vicinity of 1165 or so.  The 50 is currently at 1162.82.
 
Since all this is fractal in nature this scenario should pop my second sell signal on the weekly chart and give an additional secondary target around 1130 on a complete meaningful failure.
 
For those of you not familiar with my ranting and ravings about failure the term DOES NOT mean a collapse into Mad Max world or even sailing down to the 08 lows as I think the low is in.  (at least for now)  What I’m talking about is a failure of the latest trend which gives trading opportunities of significance opposite the trend.  The direction of this market is still up and that is the direction I have been trading until recently because of this correction.  However, I will not simply sit out a easily identified correction waiting to get long.  I see no sense in it when the signals are there and there is a high probability, low risk trade there for the taking. 

Warning:  Again this is no widows and orphan market.  in fact widows and orphans are screwed in this economic environment.  Along with un-seasoned traders or other assorted holders of retirement accounts etc.  the big boys GS, JPM et al are still having their way with the nation’s wealth all sanctioned by the politicians, treasury and Federal Reserve.  The citizen counts for nothing but votes and apparently the powers that be have figured out that the dumb-ing down has worked.

How bout those gold contracts.  Down about 5% in two days.  Almost $50 per ounce fluctuation in what seems like nano seconds.   Gold’s doing what the market does and the market does what the dollar don’t.  Kinda simple huh.  Gold closed below the daily 20 SMA which really means nothing but likely to go test the 50 currently residing around 1330.  Maybe by thanksgiving.  I won’t get excited about gold failing until it closes below 1330 on a weekly basis.   Then next stop 1275 or so.  I’m a buyer (testing the waters) below 1200.  Outside that I see no reason for gold not to go to 1500 and beyond which will mean the markets will shoot for new highs before the jig is up. 

Lots of concern of this QE and the Bolshevik Keynesian plan.  But this is about the market so, I will try to put up some charts to go along with this rant after while right now I got some shrimp gumbo ready to choke down with a Pabst Blue Ribbon.  I know, but it was cheaper than dirt (or tomatoes for that matter) and reminds me of when I was 16 skipping school and crossing into North Carolina to shoot pool and drink beer like a grown up.  LOL 

Here ya go ... click anywhere on the chart to enlarge.

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