Monday, April 27, 2009

Possible Top in, but I'm not Aggresively Bearish; April 27, 2009


The market was strange today as all day NYSE breadth was negative and most of the major indices followed suit. In addition, the risk currency trade fell hard today as both the USD/JPY and EUR/USD declined big last night into today. The fact that 876 S&P futures was not exceeded, the rally from last week looks very corrective, and was done so with all these weakening risk indicators, tells me a top may be in.

I have been fighting this uptrend for weeks and will not get aggressively short. I do have a covered call short S&P position by using SDS which double shorts the market. Outside of that I'll watch the decline and wait for a bottom to get long again, or perhaps jump on the decline as a momentum short term trade. The target for the decline is the 780 area.

A decline is needed before this market goes higher and is worth the risk of getting long. I'm just not going to take anymore big positions on the short side until things clear up.

If I just couldn't resist the urge to short this market now, I would do so with a stop at the 873 S&P futures level, which is the beginning of the 5 wave decline I lable in my attached 4hr chart. As long as that level holds, I do see a lot of bearish potential in the short term.

2 comments:

jozef said...

Hi,

I have the same Problem. I was short from 862, but now i am out (847). It´s not so easy spring in. What´s your opinion to the best level for shorting.

Todd S said...

My stop is the 876 cash S&P with a target of at least the 800 level but possibly the 7801 level. So with risk/reward tolerance at those levels, short when seen fit. I am short now.

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