Weekly Update

By: Angelo Campione | Sun, Sep 13, 2009
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9/13/2009 6:58:38 PM

Current Positioning:
SPY: Short 50%
QQQQ: Short 50%

General Commentary:

The system for the SPY is on a Sell signal __ __ __ __

The system for the QQQQ is on a Sell signal __ __ __ __

Well, you've got to hand it to them, the markets are doing a great job in giving the appearance that it's blue sky ahead, we hit new highs this past week and the trend is clearly pointing higher. Having said that, we remain unconvinced that all is well and a turn lower is not far away.

I've said it many times that the market loves to do the opposite of what's expected, and who knows, maybe this is one of life's little ironies that's necessary to add some spice to our existence!

I don't know about that, what I do know is that I'm not buying this move higher, it has suspicion written all over it. It may turn out that we do go higher as the fear of missing the gains rises but the probabilities that prices will be lower over the next few months is growing.

Being Patient (and remaining short) is likely to be rewarded in the not too distant future. I know it's not easy being against the crowd but we'll stick with the system.

On to the analysis..

SPX Chart - Bigger Picture

Looks like it won't be too long now before the rising wedge pattern we've discussed in past weeks breaks. Chances favor that the break will be to the downside, note the negative divergence on the MACD histogram, also note the short term line on the linear MACD is potentially getting ready to cross lower.

SPX Chart - Shorter Picture

The shorter term shows the rise of this past week now meeting resistance at the previous mini rising wedge line. The linear MACD has now crossed and shows the potential for a continuation of the bullishness into options expiration week.

Options expiration weeks usually have a bullish bias but it's not looking as though there'll be any significant upside here, there's still substantial resistance above and the market seems to be setting up for a drop in the near term. We could still nudge higher this week, although the 1060 region is likely to contain the move at this point.

For the week ahead, support on the SPX is 1000 - 1015 and resistance is at 1050 - 1060.

NDX Chart - Shorter Picture

The Nasdaq remains in an impressive uptrend and also made new 2009 highs this past week. The internals are still relatively weak although, which means we need to remain wary of these moves higher. Also note the potential negative divergence on the RSI.

The MACD has turned bullish here and could be indicating a continuation of the move higher with the general positiveness behind options expiry week. If you are long here, keep your stops tight.

For the week ahead, support on the NDX is at 1650 and resistance is at 1690 - 1700

The VIX Picture

The VIX has fallen back to support but the internals haven't deteriorated significantly, which means be wary of the market bullishness.

If the linear MACD crosses higher again, we'll be seeing divergence that'll add to the dark clouds that are hovering around the markets. It looks as though we're in for an interesting week.

The VIX measures the premiums investors are willing to pay for option contracts and is essentially a measure of fear i.e. the higher the VIX, the higher the fear in the market place. It tends to move inversely with the markets.

Performance

We're using a starting capital of $5,000 for each market and allocations are based on 25% of this or the remaining balance.

QQQQ
Entered L/S Price Qty Value Closed Price P/L Balance
26 May Short 33.21 37 $1229 26 Jun 36.12 $108 $4,892
11 Jun Short 36.72 34 $1248 29 Jun 36.44 $10 $4,902
31 Jul Short 39.56 31 $1226 24 Aug 40.36 $25 $4,867
07 Aug Short 39.91 31 $1237        
31 Aug Short 40.16 30 $1205        
                 
SPY
Entered L/S Price Qty Value Closed Price P/L Balance
11 Jun Short 94.05 13 $1223 30 Jun 92.72 $17 $4,976
23 Jun Short 89.47 14 $1246 30 Jun 92.72 $45 $4,931
15 Jul Long 91.81 13 $1194 17 Jul 94.06 $29 $4,960
31 Jul Short 98.65 13 $1282 24 Aug 103.39 $62 $4,898
12 Aug Short 99.56 12 $1195        
01 Sep Short 101.95 12 $1223        
                 

Quote of the Week:

The quote this week is from Albert Schweitzer, "An optimist is a person who sees a green light everywhere, while the pessimist sees only the red stoplight... the truly wise person is colorblind."

Feel free to email me at angelo@stockbarometer.com if you have any questions or comments.

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Angelo Campione

Author: Angelo Campione

Angelo Campione
"Improved Speculation Through Timing"

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