Sunday, February 10, 2013

02/10/13 - SPX Hourly: System switching to Bearish

Last SPX Cash close: 1517.93
Last UVXY (long volatility) close: 10.53

Current position: short 1 lot of SPX (via SPXU).  Avg px = $31.04.  Stop is $29.1.
Position: currently BEARISH

Current Plan: expect to close shorts mid week
Expected position adds: add 1 lot SPX (via SPXU) if 1520+ intraday.  add 1-2 lots long volatility via UVXY.

The following is a redacted version of the hourly chart I look at.

Short term (next few days): SHIFT TO BEARISH
SPX is likely to make a new incremental high on Monday 2/11/13.  Unfortunately, I am seeing this as short-lived.  I am expecting a revisit of the red neckline between 1490 and 1495 by mid week before a small bullish move for 1-2 days.

Intermediate term (1 month outlook): SHIFT TO BEARISH
The intermediate outlook is bearish.  The target is in the range of 1400-1420 by early March.

The overall thesis is the runup since December 31 of > 6% is coming to an end.  The pattern formation is similar in form and structure to the May 2010 flash crash.  Although I am not predicting something as extreme as the flash crash, I am still expecting a 5% correction.

Long term (> 3 months outlook): REMAIN BULLISH
The bigger picture is still bullish in my view.  Current position is we will revisit all time highs in the summer.

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