Index Trading

Is the 2007 Market Top in the SP500 trying to tell us something now ?

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 spx20102007

There app ears to be a pretty solid chart pattern similarity between the 2007 sp500 market top and the current 2010 market structure.  The 2007 top was a slow grinding top and almost seemed like it happened in slow motion.

The current 2010 price action seems to have the same flavor with slow trickle up price action on generally weak volumes.  It is this slow and meandering price action that seems to lull a lot of people into complacency and forget that this market still has the potential to turn on a dime and transition into fast and furious downward price action.

But actually it would be incorrect to call the price action after the final high in 2007 as ‘fast and furious’.   It was still labored price action that marked the early stages of a much longer term decline.

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Went long the TZA Direxion Daily Small Cp Bear 3X Shs 7.50 April Call Options

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Today’s reversal candle was pretty nasty looking and serious enough for me to jump into the TZA Direxion Daily Small Cp Bear 3X Shs 7.50 April Call Options.  I will probably go long the TZA directly or some other inverse bear ETFS tomorrow.

This looks like an important top, but it is way too early for me to be talking about it being ‘the top’.  It could just be a swing trading type of top, but it looks serious. 

In addition the Mcclellan Oscillator looks very ominous as I see a double top in price of the New York Stock Exchange and an oscillator that looks ready for a steep decline.  Price usually follows the oscillator down.

mclellan20100325

It remains to be seen how well some of the stocks behave in the coming correction.  I just got done talking about how great LVS Las Vegas Sands looks, but if the market as a whole falls apart, LVS is going to have to the 20 level, otherwise a more complex correction could ensue and it would have created a false breakout.

Its funny how yesterday I was talking about not shorting this market until the 50 day crosses negatively down through the 200 day moving average… but then only a day later I am trying to be a hero calling a market top.  I guess it is just too tempting to try to nail an exact top because most of the ‘juice’ of the decline seems to happen in the first 20th percentile.

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Not Short Selling until 50 day moving average crosses 200 day moving average

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SP50020100324

My mindset right now is to absolutely refuse even thinking about shorting this market with inverse ETFS or any other means, until and if the 50 day moving average of the SP500 crosses over bearishly the 200 day moving average.

Now you might say I am ‘slow’ or chicken to attempt to short this market until I get such a long term signal, but I would rather be a slow chicken that takes his time to get on the right side of a trend than super index trading expert hero that feels the need to try to pick the exact top.

For all I know this market may trade all the way back up to the old all time highs in a year or two.  In fact that situation has a decent chance of happening based on simple oscillating stock and index theory alone.

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The Market is looking Very Bullish Do Not Short this Market

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The SP500 has elected to break above the crucial 1116.56 level that I had alluded to several times before.  This is a very bullish development and now opens the door to expanding upside price action moving forward into 2010. I cannot recommend shorting this market now.  The risk reward is simply not there.  That is … Read more

What I learned looking at 100 ETF Charts Yesterday

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This is just a quick post.  But I wanted to relay to you what I noticed looking at 100 ETF charts across many different sectors yesterday. Put simply, my take is that many of them look surprisingly constructive.  More specifically I am noticing quite a few clear head and shoulder bottoming formations.  If they engage … Read more