Anyhow, as we discussed in the weekly round up, we were in the middle of no man's land entering the week; with a very tight range of 3.5% (1430 on upside, 1380 on downside). Well in just we've come down to test the bottom of this range. Now, for you technical analysis types, I've looked at both the exponential and simple moving averages and both 50 days are sitting nicely at 1379-1380. So unlike last week, both types of moving averages show us the same thing. The S&P has dropped to 1378-1379 so we'll see how the rest of the day unfolds.
Generally my strategy is to lighten up short exposure when we head into the bottom of a range and then rebuy that exposure if we break through (no bounce). Now when I did that a week ago Friday (rebuying some short exposure after breaking through "support") we got punished for that, but apparently the simple moving average was still sitting as support. This time, a break below 1375 or so would mean both versions of the moving average will have been broken.
Frankly this looks like a text book breakdown; the initial
surge down (2 weeks ago) followed by a light volume bounce (last week)
followed by a retest down... but that's how things used to work. In
this new and improved (managed) markets, we just never know what crazy
things will happen out of thin air (see mid April)
More serious students of technical analysis can correct me on this. But from where I sit it would be important for the bulls to hold 1380 on a closing basis... if normal historical technical patterns are obeyed. For those of you who don't follow technical analysis, just ignore this whole post and realize we are at a potential inflection point :)
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This article has 1 comment:
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pooramerican
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22 Comments
Jun 06 11:34 PMAlso, the end of this month will mark a 3 month cycle which is gonna be crazy as funds shift/dump positions,etc.
Do you think Gold looks good here?
I was in ABX then the strong dollar policy talk came by and I got out. do you think this is a good entry point or should I wait for it to clear previous high?