Saturday, March 27, 2010
Keeping Lower Highs is Key to a Top Being in
The market didn't continue it's decline from the current top on Friday, but instead tried to rally again. But it could not make a new swing high (at least down to the 15min chart) and reversed in similar fashion to what it did on Thursday. Notice that 1175 in the S&P has created some problems for the bulls as it's rejected them Wednesday, Thursday and Friday. This level appears to have some importance so I'm going to watch it carefully. On the above daily chart you can see a 5 wave count possibly complete right now. So at least a correction, if not an all out sell off, should be in the cards in the very near future if it's not underway right now. Keep in mind that Mondays have often been notoriously bullish the past few months, and that we'll also be in end of the month/quarter trading early next week so a lot of josseling around and positioning will occur. Normally this all results in bullish action, but I trade based on the charts, not on what usually happens.
15min S&P Cash Index
The above S&P 15min chart shows a possible downtrend forming with lower highs and lower lows. It's simple, as long as lower highs and lows keep occuring, the trend is down. I'll simply lower my stops just above the previous swing high, which in this case is currently at 1173.93, until either I get stopped out or a 5 wave impulsive decline forms. If an impulsive decline forms I'll adjust risk accordingly. I'll explain how I do that when the time comes. But for now, I simply have a short position in place to stop out at 1174, and will continue to lower my stop with each new swing high created. If I am stopped out, that's fine, I'll simply wait for another toppish structure to form and repeat the process.
The structure and strength of the decline will tell me more about the larger trend. But right that trend is quite questionable, so I'm playing only the short term moves at the moment.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.