Wednesday, March 19, 2008

Wednesday fade




A major give back today of yesterday's pop, holding true to previous post-FOMC rate cut behavior. All the technical tells were in sync today after the morning double top.

TICK, NYAD and the VIX aligned to show the way down. Once the parabolics turned negative on the double top and the 20 bar SMA got violated mid pivot, the trend was clearly down and once PP got violated in the last hour, S1 was a pretty good bet. Strong selling into the close doesn't bode well for tomorrow. We continue to follow our "sell the rallies" strategery. With the Qs now back below the 20DSMA, we are looking for a test of the lows.

4 comments:

Andrei said...

Nice post of the follow up fade! Do you place any trades to bet on the overnight gap?

bzbtrader said...

As I've mentioned for the past several weeks, no overnight trades for now. I much prefer the risk control of intraday pivot trades in lieu of guessing opening gaps (in either direction). With 10%+ daily moves in the VIX now a common event the risks of overnights appear to greatly outweight the possible rewards given my trading mantra "don't lose money".

Andrei said...

What is your short, long term view. Are we going to break that mean downtrend line and the 50dma? I see a broadening pattern forming, but we must test somewhere around 1234 in the S&P before moving up for good. Or if we break through without testing, then a retest of the trendline and a move up will signal a bottom. Some have already been calling a bottom. Whats your take?

bzbtrader said...

Andrei,
I'm not a market guru. I use the 3 linear regression studies of the daily, weekly and monthly prices to feel the pulse of the market and since my trading interests are limited to the Qs, XLF and a watchlist of only ten stocks, my views are somewhat myopic. My current view is cautious. . . hence no overnight trades and no longer term (3-5 weeks) premium decay plays, which worked great last year to generate a reliable revenue stream. I tend to look for a strategy that works reliably in prevailing market conditions and follow that until market conditions change... hence my curent focus on fading the rallies. Despite the many pundits, periodicals and technicians who see a bottoming pattern, I consider the underlying fundamentals to be dismal at best, with a number of potential economic timebombs looming. . . think BSC. As such, I just continue to take the markets one day at a time until the indicators and the fundamentals allow me the comfort of a longer term view.