Wednesday, November 26, 2008

11.26.08 - Gap Plus

Cumulative Tick has been explosive and all internals are very strong. Normally I'd be levered long by now; however, I wonder how much more juice we can squeeze out of this rally ahead of the holiday (also note that not all sectors are joining in on the fun). Speaking of the holiday, have a wonderful Thanksgiving. Market performance aside, I tend to believe we all have something special to be thankful for. And back to the markets, manage risk with trend line support on this linear move. If we hit R1 at SPY $87.50, I'd even look at legging into net shorts. Lastly, don't forget Friday is a half day and volume should be light. Vix has fallen 6% to 57.

9:20AM PST: Feeling a little heavy here and indicators are struggling to maintain their earlier trajectories. If we do turn south, watch the rising VWAP for potential support. Quantifiable Edges looks at the risk of shorting near major lows here. R1 is proving support for the NDX, which is showing relative strength.

9:40AM PST: Made it through that patch. Very strong day -- headed to R1. TNX is again getting pummeled -- Aggregate bonds (AGG) is very overbought, though it looks like it still has some room to run -- keep an eye on it.

10:05AM PST: Breakout, watch very closely now. Love to be wrong about this being the max for the day. No sign of letting up and not that far away from the 50-day. We'll see.

10:25AM PST: Mumbai terror attacks... You've no doubt read about the perceived risks in the NYC subway systems over the holiday. Hopefully/probably just alarmist chatter. A reminder of the times we live in though.

10:55AM PST: VIX has slowed its rate of descent and AD line has flattened. Cumulative tick remains constructive, however, even as price takes a breather...

11:25AM PST: Looks like that really was just a consolidation breather, well see if this new thrust can hold. Final hour will be interesting for sure.

A Year Ago - This was just about the time the longs started pounding their heads against the wall. Who would have guessed we would have moved down this quickly?

11:35AM PST: Well, I was wrong to be so skeptical [add: of how far this could run]. SPY $89, the [correction] 20-day Moving Average would be the next major resistance point. I'd hate to get there too quickly just to see it fail.

11:50AM PST: Indicators remain strong. Resistive volume spikes are accompanying the price peaks, but they are having no impact, suggesting short covering. If you are thinking of shorting, I'd wait for the close [add:] or much clearer evidence of a reversal (and see the QE link above!).

12:20PM PST: And that 20-Day MA did indeed prove to be a magnet. Now what? See above, but still no evidence of it. Don't get run over by picking a potential resistance level without confirming evidence it actually will play in your favor!

Close: Very bullish intermediate-term and I wouldn't have guessed it coming into the day, but I don't like how short-term overbought we are now. In any event, enjoy your day off!

Never Investment Advice

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