I think your message is to stand aside from position trades at this time because the stop loss points are far too wide. I agree. My view is that we have lower lows and higher highs in place and we are now in decline. Based on this weekend's analysis, I will short a quick run to 1475 (broken trendline) and 1487 (confluence of 62% retracement and bottom of previous range). Should we get a higher low with positive divergences in volume and breadth, I will pull my orders. It is going to be a while before I get bullish.
There are three sets of data which I have watched very closely and which have kept me in right market direction.
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Breadth models on NYSE and NASDAQ: A/D issues, A/D volume, and highs/lows. A/D volume is the single most important of the 3.
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Credit spreads: corporate and high yield spreads to treasury yields are an excellent measure of investor risk appetite. The recent SnP highs were made with widening yield spreads. Before I am ready to call a bottom, I want to see yield spreads narrowing with equities rising.
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VIX: also a measure of risk appetite. I use VIX inversely of many because I do not consider low VIX as bearish and high VIX as bullish (although I consider extreme high VIX as possibly bullish). I want to see VIX falling as equity indexes are rising. Recently, we had VIX rising along with the SnP as a bearish divergence. I want to see VIX falling with rising indexes before I am ready to get bullish.
My general view is that the money in this market is to be made on the short side as long as one avoids getting in the way of Fed induced rallies.
Earl
On the basis of EOD charts:
[a] In terms of price correction the rise from 1363 to 1555 has been corrected fully.
[b] For me to assume that the fall is going to be prolonged and the current leg of the downswing has some steam left in it, the recent low of 1370 will need to be crossed on a closing basis.A close below the 1370 low would clearly demonstrate the weakness in the market.The very high volatility level and the massive intra-day ranges though cause the stop loss levels to be too far from the entry point and that is a risk anyone entering the market at the current time will have to live with.
[c] For me to assume the upswing of the past couple of days is tradeable to the upside we will need a close above 1445. If one were to enter a long trade now on the basis of a close above 1445 , the StopLoss level I get from the method I use is way too far to provide any comfort. So as of this moment I would avoid a long trade. I would
enter a long trade IF I get a buy signal from my method POST a HIGHER LOW. Such a buy signal would inspire confidence as [i] it is coming after a vicious correction to the prior up move, and [ii] there is clear evidence that the low for the moment is in.
R
profitok@xxxxxxxxxx net wrote:
from a close low of 1406 add 3% and you are 42 points
we already reach 1450
using tomorrow up 100 to 125 to short
Ben
----- Original Message -----
From: BobsKC
Date: Thursday, August 16, 2007 2:33 pm
Subject: Re: [RT] Time to cover the shorts??
To: realtraders@ yahoogroups. com
> I have just closed my shorts and am now entering some of the
> beaten
> down commodity stocks such as TCK which has huge asset to
> liability
> balances and a PE of 7. Still, I am holding on to 70% cash.
>
> Bob
>
> At 10:52 AM 8/16/2007, you wrote:
> >The way the charts look the current leg of the downside(if
> there is
> >more to come that is) does seem more or less done.
> >
> >Not a case of hoping against hope but wondering if it is time
> to
> >take money off the table in case of standing short positions.
> >
> >R
> >
> >
> >
> >
> >
> >Boardwalk for $500? In 2007?
Ha!
> > Play
> >Monopoly Here and Now (it's updated for today's economy) at
> Yahoo!
> >Games.
>
Boardwalk for $500? In 2007? Ha!
Play Monopoly Here and Now (it's updated for today's economy) at Yahoo! Games.