Thursday, December 11, 2008
The Quick and the Dead; Dec. 11, 2008
The market's technicals continue to show weakness on this rally as shown from the last chart posted below. However the internals of the market are still strong and signal further rallying. NYSE breadth is positive today, however it keeps getting weaker and weaker every day as seen at the bottom indicator in the chart above. All this tells us the trend is weakening and will end with a sharp selloff. With the weakness building but internals still showing strenght, I expect a pop rally into the 950 area of the S&P before a top forms. Any strength above 900 is a good shorting opportunity and I will be taking advantage of that. I bought back more call option protection yesterday and today at a lower price in preparation for this rally to 950. As seen in the above chart, I project a rally to 950 and then a sell off to 800, a period of consolidation will then occur. This will be a great shorting opportunity because our risk will be well defined and the profits will be quick and big.
With all that said, we are in a large 4th wave which means it's going to be very ugly and difficult to predict what's going to happen. So my strategy is to align myself on both sides of the market for now and take profits quick as they come to me. As the title says, in this 4th wave there are two types of traders, the quick and dead. I'd like to be quick. I'll be taking profits on positions when they move into the green.