Thursday, January 28, 2010

The Situation

This post does not have anything to do with that colorful reality show character from the Jersey Shore. It does have something to do with some basic support and resistance daily bar bands. Regular readers know that I'm typically not a long term investor. Two to three weeks is my concept of "long term", with only a few exceptions . . one favorite being butterfly option plays, the details of which I profiled in last year.
So, while scrolling through the components of my Telechart rotation model, I was struck by the current "situation" in XLF and EEM and decided to explore a little further.
As of Wednesday's close both XLF and EEM fired BUY signals through Project Z . . XLF with an 82% probability, EEM with an 88% probability.
Both ETFs share a similar beta (1.47 & 1.60) and both are dead on the bottom of the rotational model (ROT) components with values of -32 and -35. This low weighting in the ROT in no way reflects the potential turnaround possibilities for these 2 ETFs . . it just indicates that positive momentum as measured by the 6 period moving linear regression on 3 day bars has not yet become apparent.
If I rely on the Project Z defined momentum cycles for my entry, then I know my target exit is 8 to 12 days away, if not sooner. Tomorrow I'll take a closer look at the possibilities for a low risk spin off trade based on the "situation".

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