1/17/2010 10:46:00 PM
SPY: Long 50%
Well the week didn't quite pan out as anticipated, while we got the expected pop up on Monday, the weakness expected for the rest of the week didn't happen.
This stock market game is a funny one, while the universal truth is that we don't know what tomorrow brings, we try to work out some semblance of order through a given system to give us the best chances of positioning for success.
To me, the best way to approach the market is with humbleness, respecting the fact that I have no real knowledge of the future, but that I feel good and can trust the steps I take in this moment. If, when tomorrow comes, it turns out that the steps I took are taking me somewhere that no longer feels right, I can accept what is and simply change direction without guilt or blame
Just something to think about.
So back to the task at hand, the market was choppy last week as expected, we're now approaching a key crossroad point. 1150 kept a ceiling on prices last week and we have support at around 1130, one of these points will have to give in the near term.
Our system has shifted into buy, and so the potential for a continued rise into March is increasing. A potential scenario is that we get a quick drop to around 1110 to shake things up a little, and then continue higher into March.
Let's see what the coming week brings.
SPX Chart - Bigger Picture
The bigger picture shows the market clearly continuing to trace the rising bearish wedge.
At this point, if we get a break to the downside, we'll probably find support around the 1070-1080 level. On the other hand, a break to the upside will go to the 1200 level before meeting more resistance.
The feint lines show the potential paths we're looking at for the next break.
SPX Chart - Shorter Picture
The shorter term shows the leeway we have within the rising bearish wedge and so potentially the week ahead could see a range between here and 1160.
The MACD is giving the potential for a turn lower here, but this has not been so reliable lately.
For the week ahead, support on the SPX is 1115 - 1130 and resistance is 1150 - 1160.
The VIX Picture
The VIX continues to show that the market is getting quite comfortable with higher prices, i.e. complacency.
Positive divergence is still present on the MACD histogram and the linear MACD also has potential to turn higher here. There's a reasonable chance for a pop higher during the week and therefore a drop in the markets but whether it's sustained is another question.
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.
We're using a starting capital of $5,000 and allocations are based on 25% of this or the remaining 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||19 Jan|
|16 Dec||Short||111.20||11||$1223||19 Jan|
|23 Dec||Short||112.00||10||$1120||19 Jan|
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