Monday, February 25, 2013

02/25/13: closed SPX short, going long again - bring on the volatility

Markets ran a few red lights to get close to the original target I had posted of 1480 for wave 4.  Unfortunately I didn't really stick to it as closely as I wanted to since I didn't think it would drop this quickly to reach the target.

SPX started hot out of the gate.  I added to the shorts at the open and let it sit for a bit before slowly closing out throughout the day.  I didn't hold all until the end.  The last 30 minutes was quite surprising.  Started a small long at 1495.

It is interesting to see sentiment shift from one extreme to the other. I am neither a bull nor bear, but right now I'm seeing a lot of bears come out of nowhere and a lot of bulls thinking this run up is over. Think of it this way: the bears who were holding underwater shorts and are finally in the green were looking to close today, happy to get out at break even or with a profit. Meanwhile, the speed of this decline made bulls think the top is in.

One could make the argument that this looks like late February 2012/early March 2012. There was a quick almost out of nowhere 2% drop. A lot of bears missed it and a lot of bulls got scared. Afterwards, market rallied to new highs. We could be in that scenario right now.

Levels are extremely oversold on all CCI timeframes.  There are a few positive divergences forming: RSI, OBV, CCIs (on a few lower timeframes), CMF to name a few and ADX DI+.  However, these are the first occurrences and can be easily wiped out the next day

On the daily chart, NYMO closed below the BB once again at the same time that CCI 8 closed below -100.  CCI 8 also sporting a positive divergence.

Tomorrow has a possible fib trend change at the end of the day.  Will be looking to add to the long position tomorrow.  Overall tomorrow likely remains bearish but wanted to start scaling into the next big position.

Still in the camp that wave 4 is coming to an end.

Stay frosty.

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