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You can see after the neckline broke last month we got quite a down
draft, but we did not achieve a "measured" distance below the
neckline. Moreover, we did a U-turn in the space of about 5 trading
days.
It looked to me like a classic neckline becomes resistance around the
10,200 level, and it well might have. But on Friday November 28,
after the market closed, the government announced it was
nationalizing a large regional bank, and that the shares would be
taken by the government for free -- the first time this has happened.
On Monday December first, we opened lower and dived. But there was a
violent reversal in the futures market about an hour into trading
that day, and the Osaka Boyz decided we were going higher, and then
some. It turned into a huge outside reversal day. At that point, I
got interested in the long side again, although I did not enter. I
was waiting for the flag formation after the thrust day to resolve
itself, and even thought I thought higher was stupid, I thought we
were going higher. If the flag had triggered long, it also would
have taken out the intermediate down trend line.
I guess not.
We had a very bad day today, much worse than what you could blame on
the employment report on Friday. The Osaka Boyz said "Down!" today,
and they didn't let up at all until about 5 minutes before the bell.
My short term system lit up like a Christmas tree on the short side
today, but I took no positions (the joy of discretionary trading). I
think they certainly over did it today, however, the formation sure
doesn't look very bullish to me at all. Actually, I smell a little
blood again. I just don't think tomorrow's open, where I would
normally kill these short positions, will be that bad.
A note on this: Most of us have made our money for the year, and I
don't think anyone is taking on much risk right now. You can see the
volume has gone to hell. In fact, I put a little circle around two
apparent volume spikes on the chart. Ignore them completely however;
they do not really exist. What happened was that the bank that went
under could not trade until Wednesday the 3rd (went lock limit down
on the open on both the 1st and 2nd). Then, hundreds of millions of
shares (40 percent of the volume total on Wednesday, even) changed
hands for pennies. That's about over now.
I'm still looking for a great entry for a couple of positions in this
market. I'm still waiting. I'm still eyeing that 200 day, which is
about 9,350 right now. That also puts it in the August pull back
zone, which would be a nice area to think about shopping in.
If the US falls hard tonight, I'll be crying in my grapefruit
tomorrow morning. As I say, I passed on a fair number of short
signals. I'm just tidying up for the year though -- the only big
thing I would do right now would be on the long side. Just not yet I
think.
Yuki
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