Tuesday, February 27, 2007

Wrapping Tuesday

Wow! Well I've been saying that we needed a blow-out and I think we got one. Now, of course, the question is what's going to happen tomorrow?

Given my aversion to losses I sold everything off except for LQDT. I doubled up on it this morning and managed to make up a lot of my losses when it peaked out around 20.80 or so. I sold shortly thereafter and doubled up again this afternoon at 19.98. I reacquired WLT on the bounce for tomorrow. I need 12 cents from it to get a break even on today. I need about 30 cents from LQDT to cover everything else for good.

What happened? Well what always happens - an oversold market started falling and the hedge funds panicked and like a herd of crazy steers just stampeded it down. Why the hedge funds? Because that wasn't retail traders. They sit around and wait. Funds move quickly and program trades start the avalanche.

But this is the view you need to see -

I first started showing this view in December and at that time I said it looked like we were getting too far away from the EMA 90 and a correction was needed. Since then it's only become worse.

It's also pretty obvious that we're still oversold and we could go down quite a few hundred points more. I don't know if that's what will happen but you can see from this chart that we are overdue a visit to the 90 EMA and it might take a couple of weeks to get there. Now that can happen just as a matter of "swup" (sideways-up) but I think a couple of more blow-offs are needed. Once there it will be time to start making some real money once more.

And while this indicator looks pretty oversold -

You can see here from last year that it can go a bit further down -

Point 155 is in August and 177 is in June. If you look at the chart above you can see what was going on at that time. So it can go a bit more - but not much. The key is the rollover - when it changes direction again we will go up for awhile again.

The important thing to remember about markets like this - if you don't short - your best effort is to take a break and let it sort things out on its own. Normally such a large drop happens over days to weeks - not in one day. But the fact that it did is not unprecedented. I'm going to watch WLT and LQDT and if we get the bounce tomorrow well and good - if not I'll sell off - go flat and wait for NewMoMo to turn around.

I've been doing the up/down ratio for many months now and it is at 9% which is the lowest I've seen it. The VIX went up 7+ points today to 18.31 which puts it at 39% over its 10-period moving average. Last July it spiked to 14.9% which is less than half of today's by a bunch. All 4 indices that we follow and GS - the proxy for the market forever - finished the last hour with deep red/black candles. These are all excellent indicators for tomorrow. Along with these the INDU ATR is an amazing 126 and the RSI(2) is 0.31. Severe drops in the market are always accompanied by huge ATR and an ATR of that level is unsustainable.

I am forecasting an up day tomorrow.

The magic coin is saying ... heads - also calling for an up day.

Having missed today by a country mile or two the score now stands Marlyn 15 - 12 and 5 and the coin is 12 - 15 and 5.

1 comment:


One great wrap up after another.