Weekly Update

By: Angelo Campione | Mon, Jan 4, 2010
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1/3/2010 8:28:02 PM

Current Positioning:
SPY:
Short 75%
General Commentary:

The system for the SPY is 50% into a Sell signal __ __ __ __

Welcome to 2010, a new decade is here and it's never been a better time to be alive. Sure there's no certainty about what tomorrow will bring but with the right mindset, it won't matter. It's all about being sure footed in this moment so that you can take a confident step into the next moment. Lets enjoy and prosper from where we are now and remember, from little things, big things grow!

On to the market.

Since our last report, the market has risen a little as anticipated and really wants to show that it can continue its run higher. The problem is that it's looking quite tired and in need of a rest now. A move lower into March would allow the market to wash away some enthusiasm and then set up the potential for a new high around the 1200 level by late summer.

On the other hand, if the market continues to push ahead into March, it'll be time to "sell the farm", as they say, and look to re-enter long in late summer. At this point, I'm leaning with the former scenario, but time will show if either scenario is correct.

SPX Chart - Much Bigger Picture

Here's a chart I like to put up from time to time that shows the really big picture. When the market is below the 20 EMA, we're in a bear market, when above, we're in a bull market.

We had thought that last years move was a bear market rally and would fail at the 20 EMA, but now that we've cleared that point, the potential for new bull market phase to begin is increasing (as unlikely as that seems with 10% unemployment!).

Please note that this chart is NOT a timing indicator and just because it's now above the 20 EMA, doesn't mean it's blue sky ahead. It's simply showing the beginnings of a potential new phase.

SPX Chart - Bigger Picture

For the medium term we continue to see a rising bearish wedge, a close below 1115 this week could mark the beginning of a corrective phase.

Note, the MACD still hasn't crossed over, although it's very close and we still have negative divergence in place. This picture has been testing the patience of speculators for considerable time now!

SPX Chart - Shorter Picture

The shorter term shows a close up view of the rising bearish wedge and points to a break happening very soon.

Monday should see normal volumes return to the market and we could get a pop higher just to go against the crowd and thereby appease the fear that crept in on New Years Eve. But for the rest of the week, we anticipate a move lower.

Note the negative divergence on the MACD is still clearly visible.

For the week ahead, support on the SPX is 1110 and resistance at 1130 - 1135.

The VIX Picture

Interestingly, the VIX also has a wedge formation, opposite to that of the SPX (falling bullish wedge), which adds strength to the bearish scenario for the near term. Note also the positive divergence on the MACD histogram.

We'll need to see a close above 23 however, to see confirmation of the above scenario.

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 and allocations are based on 25% of this or the remaining balance.

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 09 Dec 109.58 $120 $4,778
01 Sep Short 101.95 12 $1223 09 Dec 109.58 $92 $4,686
23 Oct Short 109.69 12 $1316        
16 Dec Short 111.20 11 $1223        
23 Dec Short 112.00 10 $1120        
                 
                 
                 
                 

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

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Regards,

 


 

Angelo Campione

Author: Angelo Campione

Angelo Campione
"Improved Speculation Through Timing"

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