Goodbye Retrace?
"all you guys who went long is the problem here you know....not enough shorts left to cover anymore...."
You've said in the past that the problem with lows late in the retrace is that a lot of shorts have already covered. But haven't you heard that every amateur and his meighbor are now shorting the market? It's the New Thing. Here's short interest for QQQ for the last year (I couldn't find September's data):
08/02 178,625,504
07/02 163,553,414
06/02 160,607,936
05/02 164,529,693
04/02 146,358,434
03/02 165,900,799
02/02 159,219,778
01/02 171,265,074
12/01 186,467,864
11/01 173,987,620
10/01 128,459,347
09/01 100,792,234
Hasn't exactly been going down.
Anyway, I went 50% long today. I am still calling Naz 800, Dow 5000, and SPX 500, but I think the retrace might be about to be blown out of the water. Yesterday, I thought pretty much the same as you. I thought there'd be a little rally for a few days, and then a return to that famous Wide World Of Sports filmclip of that poor guy tumbling off the ski jump (the "Agony of Defeat").
However, as I was watching the Naz chart develop today, I noticed a few things:
1: A textbook example of a confirmed Inverted Hammer. The hammer was on Tuesday; the confirmation was today. A very strong candlestick reversal pattern. Starts with short-covering, pulls in the bottom-fishers, next thing you know you've got a breakneck bear-market rally on your hands.
2: We also had a rather divergent pivot on MACD. This often indicates the beginning of a very strong rally.
The same features are even more pronounced on NDX, and we can even throw in a nice stochastic divergence on the NDX weekly to boot.
Is this THE BOTTOM? No. However, this rally is likely to blow through whatever price you have in mind that would be consistent with the Retrace. What price would it take to declare the Retrace kaput -- 1300? 1400? It wouldn't surprise me at all to see 1400 within several weeks, maybe sooner. I'll know more tomorrow -- maybe enough to make a definite call. Right now it's just a strong possibility (as I see it).
If things break down quickly, I'll bail out with a small profit tomorrow, most likely. However, I've got a strong suspicion that the Retrace is about to bite the dust. It's worth a shot here. Very little risk for a trader. Unless the market opens with a large gap down, I've already got a "free look" at the possible end of the Retrace.
Am I the only contra-Retrace heretic here with TA to back up his ideas?
I hope so! ;-)
ig |
