SEPT 23 INDEX UPDATE
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Short-term technicals:
DOW - upper midrange
SPX - upper midrange
OEX - midrange
NAZ - upper midrange
NDX - upper midrange
SOX - lower midrange
VIX - 24.2, midrange
CBOE PUT:CALL - .56
From the position of my short-term technicals - if the overall market continues straight up I would get a CLASS 1 SELL SIGNAL in 2-3 days, and if the market moves straight down, I would get a CLASS 1 BUY SIGNAL in 3-4 days. Just giving a perspective in terms of time; not predicting that it will go straight up or straight down.
With the strong rebound in the overall market, there is now alot of bullish talk such as: the bottom is set and the market is heading alot higher, and the NAZ is about to take off, etc. With FRI's strong rebound so many are already ignoring or minimizing the technical damage that was done. Just not sure it is the wisest to make such strong calls on a one day move, without confirmation of follow-thru. They could be right but I prefer to see the follow-thru and the technical damage repaired first. The following is a list of the technical damage which occured recently and its current position as of FRIDAY's close:
DOW - Broke below the MAR trendline, did rebound and close above on FRI
SPX - Broke both the BIG BEARISH WEDGE and the TRENDLINE from OCT 1998 to the downside. Is still below both, both close
OEX - Broke both the BIG BEARISH WEDGE and the TRENDLINE from OCT 1998 to the downside. Is still significantly below the BEARISH WEDGE but only slightly under the OCT 1998 TRENDLINE.
NAZ - Broke below the BIG BEARISH WEDGE and closed FRI slightly under it
NDX - Broke below the BIG BEARISH WEDGE and bounced off the OCT 1998 TRENDLINE, but closed above ---- it. What is interesting - that was all done in one day.
So some of the damage was repaired for the time being, but not all of it. I realise that many concentrate on the NAZ and use the NAZ as the indicator for the overall market, but I prefer to use the SPX. Just keep in mind that the SPX and OEX still have not repaired the technical damage, and I feel that the SPX and OEX are the better indicators of the overall market, rather than just the NAZ or just the DOW.
There is a common belief, and of course it doesnt work all the time. That is once a support or trendline is pierced temporarily/intraday, it is common to expect follow-thru in the direction of that piercing. That doesnt mean it will happen immediately, since it could take days or even weeks for that follow-thru. Keep in mind that the NDX pierced the BIG BEARISH WEDGE to the downside temporarily.
The VIX got as high as 27.04 and closed at 24.20. So on a intraday basis, one can say that some fear was showing, but it closed at complacent levels. The PUT:CALL RATIO is slightly on the bearish side of neutral closing at .56(I consider .6 as being neutral). I interpret such to mean that an important bottom still has not been set. That doesnt mean that the market cant rally some more from here, just that there is still a possibility that an important bottom could be set meaning that the market could still go down again to set an important bottom. Again it doesnt have to, but could.
Recently, I have been stating the percentage size of my positions rather than just stating my trades. In doing such I feel it gives a better understanding on the issue of risk management. Too often, I only hear GOING LONG or GOING SHORT - What does that mean? That person could be 50% short and going 25% long but NET-NET he/she is still short. And of course vice-versa. And who feels more confident about a position - one who is going 20% of their total position on a specific trade or one who is going 5%.
As of FRIDAY, my personal IRA account is now about 75% CASH. Of the 25% thats in the market Im 10% short and 15% long, so Im slightly biased to the upside. I normally try to keep 30-50% in cash so right now Im playing it conservative. Some will say that I have too much in cash/too conservative. My response is that I sleep damn well at night and I cant complain that my IRA account is still up about 35% for this year. Sure, if I normally use close to 100% of my funds, I could be up over 50% or even 75%. Thats OK, I want to keep the GREED FACTOR in CHECK. Remember the old story of the TORTISE and the HARE. Well, Im that SLOW TURTLE which sleeps damn well at night and enjoys making dumplings. ggggggggggg As for my TRADING ACCOUNT(options), its not doing as well as my IRA and is actually slightly negative, but it is much much smaller. I brought this topic up since I feel that RISK MANAGEMENT is probably more important than making the actual trades. Remember, most people only talk about their GOOD TRADES, but what about their BAD TRADEs, which were more - do they tell you?
Although so many are expecting the market to continue up/ continue up strongly, I would not be surpised that this rally starts to show signs of stalling, even though I am now slightly biased to the upside in my account. There is one hint that the rally in the NAZ may not last much longer. The NDX rebounded so strongly and by the close on FRI it was only down .45%. That was a fabulous recovery. However the SOX closed down 5.88%. So mathematically the the SOX percentage was about 13 times worse than the NDX, so its fair to say that the SOX significantly lagged the NDX. As I have mentioned several times, I feel that the key to any NAZ/NDX rally would be the relative strength of the SOX to the NAZ/NDX. Of course some will say for certain that the weakness in the SOX was due to one stock, INTEL. Im not sure of that, lets see. If the SOX is unable to gain in relative strength and eventually lead the NAZ/NDX up, then my position will be that the legs to this HiTECH rally may start to look like HENRY VIII's legs. Did I get the right king - I get so confused with historical facts. ggggggggg
One last thingy - That long legged DOJI/long legged HAMMER has me a bit concerned. Although these formations are commonly reversal signs, the LENGTH of the LEGs(shadows) have been signs in the past the the short-term rally is already nearing its limits, all in one day. Is it for sure of course not, but something I wont ignore.
seeya and have a nice weekend. |
