Tuesday, January 8, 2008

01.08.08 - Higher Highs and ...?

So far higher highs and higher lows (daily) -- VWAP and 5-Day MA still downward though. You have to expect consolidation like this, and it's probably healthier than a huge up day, which is more likely to fail the subsequent day. Place mental stops below yesterday's lows.

2:25PM CST UPDATE: Arguably at those stop levels... you can see those sell programs hit every time the indices tried to pop above their respective 5-day ma's. This puts us back at those "panic" August lows.

Hard to say whether we get a pop from here on a bounce or a panic drop into the nether regions of yesterday's daily chart. Statistics call for a bounce, but it's those "fat tails" one needs to worry about. With the repeated tests of this pricing level, I can see the shorts pushing the envelope further than they have been willing to up until now. Question is how far, to state the obvious.

3:30PM CST UPDATE: Well, that answers that. Volume ended up relatively higher, but not necessarily at "capitulation" levels. Next SPY technical support is very wide ranging at this point between $132 and $137. I'm afraid that isn't very helpful and you can bet shorts are thinking the very same thing. I still think a bounce up to SPY $143 to $145 is more likely in the short term. We'll see.

Blogs to review:

Vix & More -- First Five Days Fallacy
CXO Advisory -- Value & Momentum

NEVER INVESTMENT ADVICE

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